The High Court has clarified issues concerning the variation, and termination of contracts – in particular: (1) termination on grounds not initially cited by the terminating party; and (2) variation by the exchange of e-mails.
In July 2012, Enterprise retained C&S as a claims handler. Their agreement (‘the Agreement’) included a standard clause under which variations had to be made in writing and signed by or on behalf of both parties.
In October 2013, the parties exchanged e-mails relating to (inter alia) an increase in C&S’s fees.
Enterprise terminated the Agreement in January 2014. At first, Enterprise relied upon C&S’s refusal to deliver files to an external auditor. Following termination, Enterprise cited C&S’s negligent performance as a further or alternative repudiatory breach.
In general, a party seeking to terminate a contract but who gives a wrong reason for doing so - or no reason at all - may later justify the termination if there were at the time facts in existence which would have provided a good reason for termination. However, an exception was recognised in Heisler v. Anglo Dal Limited  1 WLR 1273: a terminating party may not rely on a breach which, if raised at the time, could have been remedied. C&S cited this exception to allege wrongful termination and seek damages.
Males J held that Heisler applied only to cases of ‘anticipatory breach’ or, insofar as different, to situations where the breach could have been avoided altogether. Further, there must have been at least a real (not merely theoretical) prospect of the necessary correction being made. The Judge held that the date for C&S’s performance had passed by the time that the Agreement was terminated, leaving the breach incapable of remedy [93 – 96].
The Judge then considered whether the e-mail exchange in October 2013 satisfied the variation clause. He found that it did - notwithstanding the informality of each party’s signatures; Enterprise’s Myles Ellis ‘signed’ his e-mail with a generic signature block, whereas C&S’s Mike Smith replied by saying: “Many thanks Myles, much appreciated. Mike.” Crucially, the e-mails also satisfied the usual requirements of a valid variation [115 – 136].
Rahul Varma / 23rd Mar 2016
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