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Welcome to Compact Contract, a blog where experts from Allen & Overy analyse the latest contract law themes and developments, and what they mean for your business.

Wishful thinking – when is an agreement a binding contract?

Jason Rix

During a conversation, in the Horse and Groom, Mr Ashley said he’d pay Mr Blue £15 million if Mr Blue could get the price of Sports Direct shares to £8. Mr Blue agreed and those present laughed. Thirteen months later the Sports Direct share price had risen from £4 to £8. In Blue v Ashley Read More

Reasonable endeavours: have you done enough?

Daniel Grimwood

In Minerva v Greenland, the court provides some useful pointers as to when a party has met an obligation to use reasonable endeavours to secure a particular outcome. Minerva sold a development site to Greenland. The sale agreement provided that if Minerva was successful in obtaining enhanced planning permission within a certain time, Greenland would pay Read More

The suspense is killing us – will the recitals show they’re out of time?

Alexandra Pedder

In Russell v Stone the court considered the interpretation of standstill agreements and found that they operated to suspend, rather than extend, time for the purposes of limitation. The Russells engaged Stone to manage a construction project. The project was beset by difficulties, for which the Russells blamed Stone. The parties entered into three standstill Read More

Restitution of enrichment by mistake – AstraZeneca recovers $2 million for candidate drugs mistakenly interpreted to be ‘Collaboration Compounds’

Robyn Trigg

In Astex Therapeutics v AstraZeneca, AstraZeneca were able to recover $2 million by way of restitution of enrichment for two milestone payments made to Astex by mistake under a collaboration agreement. Astex and AstraZeneca entered into an agreement to develop a BACE inhibitor for treatment of Alzheimer’s disease.  After expiry of the collaboration term, the Read More

Blessings in disguise: when does the law require you to give credit to a contract-breaker?

Richard Farnhill

If a breach of contract allows the non-breaching party to save money or avoid a loss, must it give credit for that saving to the contract breaker? That was the issue considered by the Supreme Court in Globalia v Fulton Shipping. The facts were straightforward enough, although as we shall see they split judicial opinion Read More

Is it worth negotiating? Clarification of “written standard terms of business” under UCTA section 3

Po-Siann Goh

In African Export-Import Bank v Shebah Exploration & Production Company, the Court of Appeal confirmed the test for when negotiation and amendment of “written standard terms of business” will preclude application of the reasonableness requirement in section 3 of the Unfair Contract Terms Act 1977 (UCTA). Section 3 of UCTA subjects certain exclusion clauses to Read More

Discretion: you actually own it and you have to exercise it properly

Jason Rix

In Watson v Watchfinder.co.uk, a refusal to consent to a share option entailed an improper exercise of a contractual discretion. Watchfinder buys and sells luxury pre-owned watches. It granted an option in its shares to Watson and others who were directors of a company that was providing services to Watchfinder. The relevant provision stated “The Read More

Implied duty not to prevent performance

Jason Rix

There was an implied duty in a lease that the lessor would not prevent a management company from performing its obligations, but not one that it had to positively cooperate with the company (Wild Duck v Smith [2017] EWHC 1252 (Ch)). The dispute related to the development of holiday homes in the Cotswolds by the Read More

Renegotiation clause in long-term contract – what if parties cannot agree?

Alex Hiendl

In Associated British Ports v Tata Steel, the court upheld a provision in a 25-year licence which referred a failure to renegotiate terms in certain circumstances to arbitration. The clause in question, provided that either party could serve notice on the other to renegotiate the agreed terms “in the event of any major physical or Read More

Contra proferentem rule when interpreting commercial contracts

Po-Siann Goh

In Persimmon Homes v Ove Arup, the Court of Appeal declined to apply the contra proferentem rule to an exemption clause in a major construction contract. The contra proferentem rule, set out by the Privy Council in Canada Steamship in the context of excluding liability for negligence, requires any ambiguity to be resolved against the Read More