FA Tamplin Steamship Co Ltd v Anglo-Mexican Petroleum Products Co Ltd

English Contract Law

FA Tamplin Steamship Co Ltd v Anglo-Mexican Petroleum Products Co Ltd
Image: ‘Queen Mary 2’ by Unknown Artist

Rescission of contract under abnormal circumstances can often be cited as frustration, yet unless the parties bargaining are in agreement as to the essence of the contract, there is little a court can do to amend the terms to suit.

In winter of 1912, a ship owner agreed to let one of their fleet to a commercial entity for a period of five years, with no specific requirements as to its use, aside from which types of cargo were acceptable for carriage. Just over two years into the agreement, the vessel was requisitioned by the British Government under Royal Proclamation, an act which would result in full compensation payable to the affected parties upon its safe return.

Having planned to return the ship after only two months, the Admiralty Transport Service informed the respondents that they would in fact be extending their requisition indefinitely, thereby denying the respondents any future use of the ship until the end of its military use. This left the appellants under the assumption that by an alteration in the use of the vessel, the contract had now expired and so no further payments were due, and that when issuing compensation, the State was liable for the loss suffered only by the appellants, as they were legally the owners of the ship at the time of requisition, a position fiercely argued by the respondents.

Having failed to settle the matter through arbitration, the case went to trial, during which the judge held that the requisitioning of the ship did not constitute a termination of the contract, but instead served to suspend the contract until such time that the vessel was returned, which at the point of litigation, was looking unlikely to happen within the agreed five year period.

When presented to the Court of Appeal, the Court affirmed the original judgment, at which point the matter was placed again before the House of Lords, who first examined the statement by Lord Blackburn in Dahl v Nelson, Donkin & Co, in which he stressed:

“[A] delay in carrying out a charterparty, caused by something for which neither party was responsible, if so great and long as to make it unreasonable to require the parties to go on with the adventure, entitled either of them, at least while the contract was executory, to consider it at an end.”

However, art.20 of the charterparty agreement also noted that:

“[T]he act of God, perils of the sea, fire, barratry of the master and crew, enemies, pirates and thieves, arrests and restraints of princes, rulers, and peoples, collisions, stranding and other accidents of navigation always excepted, even when occasioned by negligence, default or error in judgment of the pilot, master, mariners or other servants of the shipowner.”

Were exceptions to any rule that might provide for the end of the contract through unforeseen events, therefore the respondents argument that the contract was merely suspended was in fact validated by the imposition by the State during a time of war, and that despite implications forwarded by the appellants, the Court was in no position to argue against an express term of a contract, no matter how inconvenient that might be to those involved. It was for that simple reason that the House ruled by majority in favour of the Appeal Court judgment and dismissed the appeal with costs.

Key Citations

“When a lawful contract has been made and there is no default, a Court of law has no power to discharge either party from the performance of it unless either the rights of someone else or some Act of Parliament give the necessary jurisdiction.”

Krell v Henry

English Contract Law

Krell v Henry
Image: ‘Summer Morning, Pall Mall’ by Bruce Yardley

Performance of a contract since frustrated through unexpected events, lies at the heart of a matter between a landlord and potential tenant, who having secured a room for the purposes of viewing a landmark event, was left unable to realise it when those plans were thwarted through a sudden cancellation.

In 1902, the appellant had negotiated the private use of a room within a property owned by the respondent, who for reasons of convenience, had recently offered the whole property for rent for a six-month period. Having been aware that the King’s Coronation procession was expected to pass along the Pall Mall, the appellant read that the respondent was offering a single room for a fixed time and sum to those wishing to take advantage of the view afforded. By means of letter, the two parties agreed upon the arrangement, after which the appellant paid by cheque, a sum of 25l with a further 50l outstanding.

Unfortunately, the date of the procession was put back, at which point the appellant refused to pay the outstanding 50l, thereby prompting the respondent to seek recovery of the balance owed, while the appellant counter-claimed for the 25l on grounds that the contract was unenforceable and the deposit due for return.

In the fist hearing, the court awarded in favour of the respondent on both counts, relying upon the principle that the contact rested upon the presence of the Coronation procession, which for the reasons stated had not occurred, and so therefore the contract was unable to be completed to the satisfaction of both parties.

Taken to the Court of Appeal, the facts were revisited, along with the earlier facts of Taylor v Caldwell, in which it was remarked:

“[W]here, from the nature of the contract, it appears that the parties must from the beginning have known that it could not be fulfilled unless, when the time for the fulfilment of the contract arrived, some particular specified thing continued to exist, so that when entering into the contract they must have contemplated such continued existence as the foundation of what was to be done; there, in the absence of any express or implied warranty that the thing shall exist, the contract is not to be considered a positive contract, but as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor.”

It was this approach that gave effect to the cancellation of the Coronation procession as being an event that was, as stated in Baily v De Crespigny:

“[O]f such a character that it cannot reasonably be supposed to have been in the contemplation of the contracting parties when the contract was made, and that they are not to be held bound by general words which, though large enough to include, were not used with reference to the possibility of the particular contingency which afterwards happened.”

While in ‘Taylor on Evidence’ (vol II) it was also stressed that:

“It may be laid down as a broad and distinct rule of law that extrinsic evidence of every material fact which will enable the Court to ascertain the nature and qualities of the subject-matter of the instrument, or, in other words, to identify the persons and things to which the instrument refers, must of necessity be received.”

So it was for these fundamental reasons that the Court agreed with the previous decision, and ruled again in favour of the respondent, while reminding the court that although not expressed within the terms of the contract, the parties to it must remain transparent as to the implied purposes upon which the bargain was first entered into, before moving to seek legal redress.

Key Citations

“I do not think that the principle of the civil law as introduced into the English law is limited to cases in which the event causing the impossibility of performance is the destruction or non-existence of some thing which is the subject-matter of the contract or of some condition or state of things expressly specified as a condition of it.”

“[W]hatever is the suggested implication – be it condition, as in this case, or warranty or representation – one must, in judging whether the implication ought to be made, look not only at the words of the contract, but also at the surrounding facts and the knowledge of the parties of those facts.”

Grant v Bragg

English Contract Law

Grant v Bragg
Image: ‘Attorney Reading’ by Honore Daumier

Sadly as can sometimes happen, the mediation by a solicitor can prove the undoing of bargaining between parties, when for one reason or another, the third party attempts to manipulate matters to the detriment of those he was initially employed to serve.

On this occasion, a shareholder sale agreement was drafted by two company co-directors, who upon his retirement, the respondent had decided to relinquish his stake holding for a sum of around £347,000. During the preliminary stages of the contract, numerous oral agreements were made with little to no conflict, however as time progressed, the matter became complicated through the construction of a draft agreement, which had been worded by a second firm of solicitors.

At the point of litigation, communication had deteriorated to a quick succession of emails between the respondent and the solicitor alleged to be acting for both parties. Within these exchanges were a number of comments and misinterpretations that ultimately derailed the negotiations, however for the purposes of the clarification the timeline was as follows:

(1) A draft agreement was made on behalf of both parties, subject to mutual consent to document wording.

(2) The respondent’s solicitors suggested an amendment to the terms of the agreement.

(3) The suggestion was construed by the appellant as a rejection of the agreement.

(4) The mediating solicitor construed from a telephone conversation, that the respondent was refusing to sign the agreement without knowledge of the appellant’s future plans.

(5) The respondent expressed that he perceived the appellant to be contractually obliged to purchase the shares.

(6) The respondent denied he had any interest in the future of the company or the appellant.

(7) The mediating solicitor imposed a time restriction for acceptance of the draft agreement.

(8) The mediating solicitor withdrew his services upon expiration of the time restriction.

(9) The respondent later agreed to sign the agreement, despite his earlier reservations.

In the first hearing, the judge found that the discussions within the first and last email were tantamount to a binding contract, and so awarded accordingly. However, at the Court of Appeal, a reexamination of the facts and the chronology of events, painted quite a different picture.

Here, it was held that while the contract itself was not subject to time penalties, the position adopted by the ‘mediating’ solicitor was one that implied how all terms of the bargain were now defined through his presence, therefore by the imposition of a threshold upon which to contract, the eventual acceptance by the respondent was both after the fact and thereby null in effect, thus it was for that reason (and perhaps unnecessary element of the negotiation), that the appeal was upheld and judgment awarded to the appellant.

Key Citations

“As often happens when one examines separate points, there is an extent to which they are inter-related, although they each appear, on the face of it, to be self-contained.”

“[T]here is a distinction between a counter-offer or a refusal, which does put an end to an offer, and a request for further information which does not amount to a new offer but is to an investigation of the offering party’s position.”

Hasham v Zenab

English Contract Law

Hasham v Zenab
Image: ‘Palace Gate, Udaiper’ by Colin Campbell Cooper

Specific performance and cessation of contract on grounds of mistake, are both viable arguments for either continuation of contractual obligations, or the cessation of a transaction for reasons non-detrimental to both contractees. However, both approaches rely upon the honesty and accountability of at least one party should the courts take a view to upholding either of them.

In this instance, a Gujarati widower entered into an agreement to convey a determinate plot of land for an agreed sum, yet immediately after signing the disposition, she tore up the document and refused to continue with the transaction on grounds that she had been misled as to (i) the size of the plot and (ii) the identity of the individual to whom the purchaser was planning to sell it to.

During initial litigation, her argument for the fraudulent misrepresentation was based upon her limited grasp the English language, and so she had elected a representative to be present with her at the time of signing. However, it was also argued that no mention had been given of the size of the plot, which in the first instance was alleged to be half an acre, and not the two acres contained within the conveyance, a fact discovered only after the signing.

When cross-examined, the respondent was proven to have falsified the statement, and thus her witness was accused of perjury, whereas contrastingly, the appellant contested that during preliminary talks, the proposed plot was described as two acres, and not the half-acre suggested. The contract itself was signed in the presence of a third party, however the respondent also relied upon the contention that at no point during an earlier meeting did anybody translate the contents of the contract, despite the appellant claiming that not only did he explain it, but the respondent’s cousin had also clarified its contents to her. It was likewise argued by the appellant that the respondent tore up contract, not because of the plot variation, but upon the knowledge that the land was to be resold to an individual she had a dislike of; however this was also proven to be untrue after lengthy cross-examination and questioning of oral evidence.

Upon summation, the trial judge awarded in favour of the appellant, despite reservations around the integrity of both parties, and so when presented to the Court of Appeal, the Court took issue with the reliability of the appellant’s statements and proceeded to reexamine the facts before reaching the exact same conclusion as the lower court.

Take finally to the House of Lords, it was noted that vol.2 of ‘Williams on Vendor and Purchaser’ clearly illustrated that:

“[A]s a rule, either party to a contract to sell land is entitled to sue in equity for specific performance of the agreement. This right is, in general, founded on a breach of the contract, but not in the same manner as the right to sue at law. The court has no jurisdiction to award damages at law except in case of a breach of the contract; while the equitable jurisdiction to order an agreement to be specifically performed is not limited to the cases in which at law damages could be recoverable.”

Which translated that when contracting parties hold a good account of themselves throughout their dealings, equity would provide sufficient weight as to instigate specific performance; yet on this occasion, neither party had been anywhere near as truthful as a court would rightfully expect, and so on this principle it was impossible to uphold the appeal, nor enforce the equitable rights of the appellant or those forwarded by the respondent.

Key Citations

“In equity all that is required is to show circumstances which will justify the intervention by a court of equity.”

Charrington v Simons & Co Ltd

English Contract Law

Charrington v Simons & Co Ltd
Image: ‘In the Orchard’ by James Guthrie

The conveyance of land with restrictive covenants is not uncommon within property law, however when the safeguard designed to protect the needs of the vendor becomes central to his anguish, it becomes clear that the attached principles have become somewhat misused.

In a matter concerning the part-sale of an orchard by a farmer, the respondent entered into the purchase on the understanding that at no point was the road running between the two plots previously owned, to exceed the height beyond that of the section retained, as to do otherwise would impact upon the farmer’s ability to harvest his remaining plot.

After ignoring the covenant, the respondent began resurfacing the road to a height that did in fact exceed the permissions granted, thus prompting the appellant to protest both orally and by letter. When the work continued and his obvious displeasure went unheard, the appellant issued a writ in pursuit of a mandatory injunction, which would result in the removal of all works undertaken at cost to the respondent.

In the first hearing, the judge adopted the unorthodox position of taking two negatives in order to create a positive. This was executed through an injunction, while explaining that:

(i) The respondent was to modify the road so as to benefit the appellant, rather than to remove it outright, after having spent around £1400 on its construction, before paying the appellant £1062 in special damages for the harm caused to date.

(ii) The mandatory injunction was to remain ineffective for a period of three years, while the respondent set about altering the road’s layout, which itself required agreement by the appellant to trespass onto his land in order to carry out the work.

(iii) That consultation between the two parties would continue throughout this period, and that should the appellant refuse to consent to the needs of the respondent, the respondent would be granted sufficient argument so as to discharge the injunction entirely.

Upon immediate appeal, the appellant argued that the judge had erred in law when creating an injunction that rendered the breach of covenant void, that requirement to consent to the work would result in a trespass and that such an impingement and modification would cause the appellant to suffer both personally and financially, as his own orchard would be compromised during the alterations.

With consideration of the judge’s genuine wish to improve upon an already damaging situation, the Court held that when refusing to enforce the injunction with immediate effect, the court had failed to properly address the purpose of both the covenant and the injunction in favour of an outcome serving only the needs of the breaching party.

Key Citations

“[T]he judge, in adopting the course which he did, travelled beyond the bounds within which discretion may be judicially exercised; for in effect he sought to force upon a reluctant plaintiff something very like a settlement involving operations by the defendant on the plaintiff’s land which must lead to greatly increased harm to his business, as a condition or term of his obtaining a mandatory injunction should the works not prove a satisfactory solution.”

 

Carlton Communications plc v The Football League

English Contract Law

Carlton Communications plc v The Football League
Image: ‘Football’ by Anthony Barrow

The phrase ‘subject to contract’ is pivotal to the preservation of legal rights, particularly when negotiating for multi-million pound contracts. On this occasion, the eagerness of a national sports fraternity overtook the urgency for a logical and constructive approach to long-term franchise agreements, resulting in an outcome none would have wished for.

In June 2000, the Football League entered into a contract for licensing rights with ITV Digital (or ONDigital as they were then known), who themselves were subsidiaries to both Carlton Communications Plc and Granda Media Plc. Having begun negotiations in April 2000, ONDigital were extended permissions to tender for contracts not exceeding £10m, whereupon this particular bid was now worth in excess of £240m, which therefore required the oversight of Granda and Carlton, but nothing more.

In a document titled ‘Initial Bid for Audio-Visual Rights Football League 2001/2 – 2003/4 ONDigital’ Executive Director Graeme Stanley expressed within the Financial Arrangements section, that:

“ONdigital and its shareholders will guarantee all funding to the FL outlined in this document.”

While noting that as with the remainder of the document, all statements therein were ‘subject to contract’ and therefore not binding upon any parties.

During the negotiation period, the value of the contracts increased to £315m, and at the point of their contracting, express notice was given in clause 18, which read:

“18. ONdigital and FL shall use their best endeavours to execute a long form agreement within 60 days which will be negotiated with reference to the Football League Pre-Tender Document of 27th March 2000…and will include clauses such as standard legal boilerplate, confidentiality, compensation for ONdigital if there are significant changes in competition structure which adversely affect the value of the rights granted to ONdigital, minimum broadcast commitments, quality guarantees for programmes and competitions and the like.”

In December 2001, talks began which centred around the alleged winding down of ONDigital, and so the claimants proposed that the defendants Carlton and Granda were now liable as guarantors for any sums due, which at the point of litigation, was little under £134m. As was expected, the defendants noted that while assisting as a parent company, at no point did they enter into a contract with the claimants, and as such, were not responsible for any ONDigital debts outstanding.

Relying upon the comments made in the pre-contract documentation, as well as a vague mention of guarantees in Clause 18, the court examined how corporate contracting and personal liability are distinctly different animals. With reference to principles espoused in Salomon v Salomon, Kerr LJ had himself expressed in JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry how:

“The crucial point on which the House of Lords overruled the Court of Appeal in that landmark case was precisely the rejection of the doctrine that agency between a corporation and its members in relation to the corporation‟s contracts can be inferred from the control exercisable by the members over the corporation or from the fact that the sole objective of the corporation’s contracts was to benefit the members.”

While due reference was given to the Statute of Frauds 1677, in which s.4 clearly explains how:

“No action shall be brought whereby to charge the defendant upon any special promise to answer for the debt default or miscarriage of another person unless the agreement upon which such action shall be brought or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised.”

While it was further noted that in ‘Chitty on Contracts’, paragraph 4-022 stressed how:

“Apart from the exceptional case of a written offer signed by one party and accepted orally by the other, the writing must acknowledge the existence of a contract. It is now settled, after some hesitation, that a letter expressed to be ‘subject to contract’ is not in itself a sufficient memorandum to satisfy the statute.”

This rendered any argument for financial guarantee fatal to the claim, and left the court no choice but to exempt the defendants from all liability relating to damages for breach of contract, while leaving the claimants with much to reflect upon.

Key Citations

“[A] subject to contract proposal is the antithesis of or at the least incompatible with a unilateral offer. The former is not open to acceptance; it is the essence of the latter that it is.”

Williams v Roffey Bros & Nicholls (Contractors) Ltd

English Contract Law

Williams v Roffey Bros & Nicholls (Contractors) Ltd
Image: ‘In The Carpenter Shop’ by Carl Larsson

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