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2. a practical approach to
terms and conditions
Presented by
Chris Greenwell
Claire Herbert

3. what constitutes a contract?
• An agreement between the parties.
• In order for a contract to be binding there
needs to be an intention to create legal
relations, valuable consideration needs to
pass and there should be certainty.
• Generally speaking it is formed when one
party accepts another party’s offer.

4. when is the contract formed?
• Buyer and co email seller and co asking for a quote for
100 widgets. The email says any contract will be subject
to buyer and co’s t’s and c’s (not attached but stated to be
available on their website).
• Seller and co email their quote which is subject to their t’s
and c’s (copy not attached).
• Buyer and co email seller and co and accept the quote
subject to their t’s and c’s (copy attached).
• Seller and co email an acknowledgement of the order to
buyer and co subject to their t’s and c’s (not attached but
stated to be available on their website).
• Seller and co deliver the widgets.
• Seller and co send an invoice with their t’s and c’s printed
on the back of the invoice.

5. how will the court look at
offer and acceptance?
• An offer is an expression of willingness to
contract on specific terms made with the
intention that it is to become binding as soon
as it is accepted.
• An acceptance is a final and unqualified
expression of assent to the terms of an offer.
• The court will analyse the pre contractual
communications between the parties in order
to ascertain the point at which agreement was
reached.

6. is there a contract? Offer
or invitation to treat?
• A customer goes into a shop and picks up a bottle of wine
and takes it to the check out. It is priced at £4.99. He
passes it to the assistant and tenders the sum of £4.99 to
buy it. He is told that the price is actually £10.99 as the
bottle has been incorrectly labelled.
• Is there a contract?
• Does it matter?
• If the ‘offer’ is the shop pricing the bottle and displaying it
for sale and the ‘acceptance’ is the customer taking it to
the check out and tendering money at the till then there is
a binding contract to buy the bottle for £4.99.
• If the ‘offer’ is the customer taking the bottle to the till, the
shop can reject that ‘offer’ and they are not obliged to sell
it for £4.99.

7. is there a contract?
Acceptance
• Acceptance has to be unqualified and
generally speaking it has to match the offer
made.
• Company A offers to sell 400 telephones to
Company B for £2,000. Company B replies
by saying it will take 200 phones for £1,000.
Is there a binding contract?

8. incorporation of t’s and c’s
• In order for your t’s and c’s to be incorporated
ideally they need to be sent to the other party
prior to the formation of the contract and any
offer must make it clear that your t’s and c’s
apply.
• It is possible to incorporate your t’s and c’s by
reference. You need to do what is ‘reasonably
sufficient’ to give the other party notice of the
conditions.
• What is reasonably sufficient will depend on the
individual circumstances.

9. what is reasonably sufficient?
• Contract sent through with no reference to t’s and c’s
on the front but they were printed on the back.
Reasonably sufficient?
• Contract sent by fax stating t’s and c’s on the reverse
apply but no t’s and c’s faxed through. Reasonably
sufficient?
• Contract stated by be subject to t’s and c’s and t’s
and c’s sent but they are masked by a printed stamp.
Reasonably sufficient?
• Contract sent with t’s and c’s but person was blind
and could not read them. Reasonably sufficient?
• Car parking ticket stated that personal injury was
excluded. Reasonably sufficient?

10. when is the contract formed?
• Buyer and co email seller and co asking for a quote for 100 widgets the
email says any contract will be subject to buyer and co’s t’s and c’s (not
attached but stated to be available on their website).
• Seller and co email their quote which are subject to their t’s and c’s (copy
not attached).
• Buyer and co email seller and co and accept the quote subject to their t’s
and c’s (copy attached).
• Seller and co email an acknowledgement of the Order to buyer and co
subject to their t’s and c’s (not attached but stated to be available on their
website).
• Seller and co deliver the widgets.
• Seller and co send an invoice with their t’s and c’s printed on the back of
the invoice.

11. terms and conditions
• It is critical to ensure your t’s and c’s are
incorporated, they are in there for a reason!
• Entire agreement clauses.
• Limitation and exclusion clauses.
• Set off clauses.
• Liquidated damages clauses.

12. express and implied terms
• Express terms – what was agreed (either
orally or in writing).
• Implied terms – what we didn’t expressly
agree.
• But what the court says we must have
intended to agree.

13. • It’s necessary.
• Because the term gives business efficacy.
• Because “it’s obvious”.

14. D was a director and shareholder in C. D was removed
as a director which triggered share transfer and
valuation provisions in C’s Articles of Association,
including the deemed service of a transfer notice
offering his shares to C’s remaining members. D was
entitled to a fair value for his shareholding, to be
determined by an accountant.
D nominated three potential firms of accountants. C
selected one. However, D then refused to sign the
accountant’s letter of engagement and instead
demanded C disclose various documents and taking
issue with the terms of the letter of engagement.

15. D employed P, an estate agent, to sell some
property. The contract expressly provided for P
to be paid commission ‘on completion of sale’.
P found a buyer but D had managed to sell the
property himself. Therefore D did not pay P
because the sale had not been completed by P.
P argued that it was obvious that the parties
must have intended that if P found a buyer he
would get paid.
Do you think the courts were willing to imply
such a term into the contract?

16. • Course of dealing.

17. H, a United States resident, and L, a German ship building company,
entered into a Commission Agreement.
The parties had entered into two contracts previously for the
construction of two motor yachts, each contract containing an
arbitration clause and each providing that it would be construed in
accordance with, and governed by, English Law.
The Commission Agreement was silent both as to the system of law
governing it and as to how any dispute was to be resolved.
The court held that the two construction contracts represented a
course of dealing between the parties and the three contracts were
closely related. The parties had silently chosen English Law to govern
the Commission Agreement.

18. • Statutory implied terms.

19. Sale of Goods Act
section14 – implied terms about
quality or fitness for purpose
(1) Where the seller sells goods in the course of a
business, there is an implied term that the goods
supplied under the contract are of satisfactory
quality.
(3) Where the seller sells goods in the course of a
business and the buyer, expressly or by implication,
makes known …to the seller…any particular
purpose for which the goods are being bought,
there is an implied term that the goods supplied
under the contract are reasonably fit for that
purpose, whether or not that is a purpose for which
such goods are commonly supplied.

20. B supplied piping, adaptors and valves to M, for the
installation of a new plumbing system in a public house. A
particular make of part ‘Uponor’ was used for the project.
M then requested further materials from B, specifically
identifying that they would be used in the same project.
B supplied a different type of valve, which was incompatible
with the adaptor supplied previously.
A connection became insecure under pressure, resulting in
substantial flooding of the public house.

21. B argued it had no obligation to ensure that the valve it supplied
was compatible with the adaptor it supplied previously.
The Court of Appeal held that B had known that M was using a
Uponor system and had previously supplied these particular
components for the same project. It was an obvious inference from
M’s enquiry regarding further parts that M was making known to B
its intention to use the valves as a device intended to regulate or
control the flow of water in pipes used in the project. It was also an
obvious inference that M was making known to B that it intended to
use such valves in conjunction with the Uponor plastic piping that B
was aware it was using.
The court held that the valves were not fit for the requisite purpose
and therefore B was liable.

22. Supply of Goods and Services Act
section.13 – implied term about care and skill
‘In a contract for the supply of a service where
the supplier is acting in the course of a
business, there is an implied term that the
supplier will carry out the service with
reasonable care and skill.’

23. A enters into a contract with B for the provision of
certain specified IT services. They have not previously
dealt with one another before. A wants the services
carried out within 28 days. However the contract is
silent on the timescale in which the specified services
must be provided.
Question
When should B carry out the services by?

24. A enters into a contract with B for the provision of office
cleaning services. They have not previously dealt with
one another before. The contract is silent however on
how much B has to pay A for certain specified services.
Question
How much will B have to pay A?

25. Late Payment of Commercial
Debts (Interest) Act
• The Act implies a term into contracts for the
supply of goods and services, where both
parties are acting in the course of business,
that any qualifying debt under the Act will
carry statutory interest at the rate of 8.5%.
• In addition, the supplier is also entitled to a
fixed sum of compensation.

26. (1) Express terms are best because they provide
more certainty as to what has been agreed and
understood.
(2) Record the express terms in a written contract.
(3) The ‘what if...’ test
Carry out a review of your contracts. Think
about the various issues that could arise in
your business dealings. Do you have an
express term in the contract that is sufficient to
cover you or protect you in any given scenario
that may arise? If not, consider whether you
need to vary any existing agreements, or any
existing standard form contract.

27. entire agreement clauses
• The ‘Ronseal clause’. Correctly worded it
does exactly what it says on the tin.
• The only terms in operation between the
parties are as set out in the terms and
conditions. No terms can be implied.
• NB some implied terms can not be excluded
such as under the Sale of Goods Act it will be
an implied term that the seller has good title
to the goods being sold.

28. entire agreement clauses
• They need to be carefully worded, lawyers try and get round
them!
• ‘This Agreement is the complete and entire agreement between
the buyer and the seller. To the maximum extent permitted by
law, no terms shall be implied by operation of law or otherwise.
It supersedes all prior agreements or understandings between
the parties. No modification, variation or waiver of this
Agreement shall bind either party unless it is in writing and
signed by an authorised representative from both parties.’
• Contract is in writing with the entire agreement clause in it.
• Before signing the contract the buyer mentions that he wants to
purchase electrical cable to be used in a mine. It needs to be
low smoke/flame retardant as a result.
• Seller says cable is smoke retardant.
• However this discussion does not enter the written contract
which is subject to the entire agreement clause.

29. entire agreement clause
• ‘This Agreement is the complete and entire agreement between
the buyer and the seller. To the maximum extent permitted by
the law, no terms shall be implied by operation of law. It
supersedes all prior agreements or understanding between the
parties. No modification, variation or waiver of this Agreement
shall bind either party unless it is in writing and signed by an
authorised representative from both parties.’
• Is the discussion an express clause?
• Can it be an implied term?
• So the buyer has no remedy?

30. entire agreement clauses
• Not quite here as the clause says nothing
about representations.
• A misrepresentation is a mis-statement as to
fact or law which is made to the party misled
which induced that party to enter into the
contract.
• Possible to exclude misrepresentations
(although not fraudulent misrepresentations).

31. entire agreement clauses
• Lessons for the seller, make sure they are
well drafted and cover off misrepresentations.
• Lessons for the buyer if the contract has such
a clause make sure all of the important
clauses are expressed within the contract
itself!

32. liquidated damages
and penalty clauses
• The general rule – damages for breach of contract committed by
B are a compensation to A for the damage or loss A has
suffered through B’s breach. A is, as far as money can do it, to
be placed in the same position as if the contract had been
performed.
• Unliquidated damages – the court decides how much.
• Liquidated damages – the contract provides for a particular sum
to be payable upon the occurrence of one or more specified
breaches of contract.
• ‘If X breaches clause 7 then X shall pay to Y as liquidated
damages, the amount of £500 for each day that the breach
continues up to a maximum of £50,000. X and Y both
acknowledge and confirm that such amount is a pre-estimate of
the damage and loss likely to be suffered by Y as a result of
such breach.’
• Must be a genuine pre-estimate of loss.

33. • Penalty clause.
• Designed to terrorise the other party into
performing the contract.
• Unenforceable.
• A is only entitled to a sum which represents
A’s actual loss.

34. • Some useful guidelines laid down by the court:-
(1) The clause will be held to be a penalty if the sum
stipulated is extravagant in amount in comparison with
the greatest loss which could conceivably be proved to
have flowed from the breach.
(2) Where the promisor’s obligation is to pay a certain sum
of money and the contract provides for a larger sum to
be paid in the event of breach, this is a penalty.
(3) If a single lump sum is payable on the occurrence of
one or more or all of several events, some of which may
occasion serious and others more trifling damage, there
is a presumption that it is a penalty clause.
(4) It is no obstacle to the sum stipulated being a genuine
pre-estimate of damage that the consequences of the
breach are such as to make precise pre-estimation an
impossibility.

35. • The court will try and ascertain the intention
of the parties.
• The fact that a clause is described as a
penalty or liquidated damages clause is
inconclusive.
• The courts will ask if the parties intended the
clause to be a genuine pre-estimate of loss.
Or was the clause designed to force one
party to perform the contract because of the
terrible financial consequences that would
arise from non-performance.

36. The defendant bought tyres from the claimant and
agreed that he would not tamper with the
manufacturer’s marks, sell below list price, or export
tyres without the claimant’s consent. The liquidated
damages clause provided that £50 was to paid for every
tyre sold or offered in breach of the agreement.
Question
Is this a liquidated damages or a penalty clause?

37. The defendant bought cars from the claimant and
agreed not to sell below list price, not to sell cars to
other dealers and not to exhibit cars without permission.
He also agreed that for every breach he would pay
£50,000 as being ‘the agreed damage which the
manufacturer will sustain.’
Question
Is this a liquidated damages or a penalty clause?

38. • Liquidated damages clause – prove the breach of contract
and the fixed sum is automatically payable
• Sounds good?
• The defendant agreed to construct a special plant for the
claimant within 18 weeks. The contract provided for £20
per week to be payable for each week taken beyond 18
weeks. The plant was completed some 30 weeks late, and
the claimant claimed his actual loss of £5,850.
• In this case, the clause was described as a penalty clause
but it was actually considered by the Court to be a
liquidated damages clause and therefore it was upheld
that the claimant only recovered £600 i.e. 30 x £20.

39. This is why a well drafted liquidated damages
clause should also expressly reserve the right
to recover additional damages if the company’s
damage and/or loss exceeds the amount of the
liquidated damages.
‘The payment of liquidated damages by X under
clause 1 above shall be without prejudice to any
other right or remedy of Y including but not
limited to the right of Y to recover damages
from X if Y’s damage and/or loss exceeds the
amount of the liquidated damages.’

40. (1) Any liquidated damages clause has to be bespoke
and properly drafted.
Liquidated damages Penalty clauses
Genuine pre-estimate of loss Threat to compel performance
Amount stated is amount which will Clause is unreasonable and
be recovered without proof of actual therefore can only recover actual
loss loss
Court looks at the intentions of the parties at the time of the
contract in deciding whether a penalty or not

41. (2) A liquidated damages clause is not going to
be appropriate for every contract.

42. exclusion clauses
• A clause that excludes or limits liability.
• To rely on it, it must be incorporated into the
contract and on its true construction it covers
the breach and the resulting loss or damage.
• Incorporation by notice is allowed as
previously discussed, however what is
‘reasonably sufficient’ to bring the term to a
person’s notice will depend on the severity of
the clause. Lord Denning’s ‘red ink with a big
red hand pointing to it’.

43. exclusion clauses
• The court is not a big fan!
• It will be construed strictly against the party seeking to rely
upon it, the contra proferentem rule.
• A car is designed to carry five passengers and is actually
carrying six passengers when it crashes. There is a clause
in the contract exempting them from liability for damage
caused ‘whilst the car is carrying any load in excess of
that for which it was constructed’.
• Was the insurer able to rely on that clause to exempt him
from liability?

44. exclusion clauses
• Statutory Limitations Unfair Contract Terms
Act 1977.
• Applies to contracts where one party deals as
a consumer or where businesses deal with
each other on one party’s standard terms.

45. Unfair Contract Terms
Act 1977
• You can not exclude liability for death or
personal injury.
• Except in so far as the term satisfies the
requirement of reasonableness you can
not:
(i) Render a contractual performance
substantially different from that which was
reasonably expected of you; or
(iv) In respect of the whole or part of your
contractual obligations, render no
performance at all.

46. Unfair Contract Terms
Act 1977 reasonableness
• The time for determining whether a clause is
reasonable is the date upon which the
contract was made.
• section.3 UCTA ‘The term shall have been a
fair and reasonable one to be included having
regard to the circumstances which were or
ought reasonably to have been known to, or
in the contemplation of, the parties when the
contract was made’.

47. reasonableness
• Five guidelines the court looks at on reasonableness:-
(a) The strength of the bargaining positions of the parties relative to
each other, taking account (among other things) alternative means
by which the costumer’s requirements could have been met.
(b) Whether the customer received an inducement to agree to the
term, or in accepting it had an opportunity of entering into a similar
contract with other persons, but without having to accept a similar
term.
(c) Whether the customer knew or ought reasonably to have known of
the existence and extent of the term (having regard, among other
things, to any custom of the trade and any course of dealing
between the parties).
(d) Where the term excludes or restricts any relevant liability if some
condition is not complied with, whether it was reasonable at the
time of the contract to expect that compliance with that condition
would be practicable.
(e) Whether the goods were manufactured, processed or adapted.

48. what is reasonable?
• It is very fact specific.
• BT’s standard term that it could terminate a contract on one
months notice?
• Unreasonable as it was not limited to cases where there was
good reason to do so.
• Terms in a contract for the supply of computer hardware and
software excluding liability for indirect, special and
consequential loss and imposing a two-year contractual limit for
claims.
• Unreasonable because the supplier ‘had so misrepresented
what it was selling that breaches of contract were not unlikely’
and because the customer had no choice but to accept them
• Commercial contracts with equal bargaining power, and when
risks are to be borne by insurance, the Act ‘leaves the parties
free to apportion the risks as they think fit…and respects their
decisions’.

49. exclusion clauses
• Seller – can be a huge advantage in any
dispute and to some extent give you comfort
and security regarding liability for insurance
purposes etc. Make sure you have taken
advice on their enforceability.
• Buyer – Have a look at them, if you are
selling on can you pass on your losses?
Even if they are in there are they
enforceable?

50. set-off
• Set-off is a defence to a claim.
• Typically the defendant may admit that he
owes you £x but says that he should not have
to pay you because you owe him £x or he
has suffered damages as a result of the same
contract which equals or exceed the sum due
to you.

51. set-off
• If you are the seller this can be an
annoyance. It can be used by the buyer to
simply delay payment and seek spurious
discounts.
• It can be dealt with by way of a separate
clause within your t’s and c’s which bars the
right to claim any entitlement to set-off or sets
limits on that entitlement, such as set-off will
only be allowed where you agree that the
sum is owed or a court has decided that it is
owed.

52. set-off
• ‘The Seller agrees that any Substantiated
Claim which the Buyer has against it under
this Agreement may be set off against any
payment due to it.’
• ‘Substantiated Claim’ – A claim in respect of
which liability is admitted by the Seller or
which has been decided upon by the court.
• Can you set off where it is not admitted or
decided upon by the court but simply
claimed?

53. set-off
• Valuable to the seller if it is validly excluded as in the
event of non payment of sums due it would be
relatively easy to secure summary judgment.
• To exclude set off fully it must be worded to include
all types of set off, including equitable set off.
• Depending on the drafting, if you are the buyer, even
if there is a set-off clause it may not be fully binding.
There could be ways round it.
• Set off provisions, depending on how they are being
used and the circumstances may come under UCTA
and be the subject of reasonableness.

54. the issues that can arise on termination and
how contracts can be properly terminated
• Termination clauses are common place in
commercial agreements
• A well drafted termination provision should
clarify each party’s obligations and
liabilities;-
(3) Is there a right to terminate?
(4) What notice must be given?
(5) How should notice be given?

55. ‘This Agreement takes effect from the commencement
date and shall continue in force unless terminated in
accordance with the terms of this Agreement or by
either party serving at least three calendar months
notice on the other party.’
‘Any notice under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered to
the party concerned at the address set out on the first
page of this Agreement or such other address as that
party may from time to time notify in writing and shall be
deemed to have been served if sent by registered post
48 hours after posting.’

56. Where the contract is silent on termination there
will generally be an implied right for either party
to terminate the agreement by giving
reasonable notice.
What is reasonable depends on the nature of
the contract.

57. unlawful termination
Where a contract has been terminated
unlawfully, the innocent party may be entitled to
any of the following remedies, depending on the
circumstances;-
(2) Damages
(3) Specific performance
(4) Injunction

58. Damages - generally ordered to compensate
the innocent party for the loss it has suffered.

59. Specific performance
• An order of the court compelling the party in breach to
perform its contractual obligations.
• Not usually granted where an award of damages would be
an adequate remedy. So not normally available for breach
of a contract for the sale of goods because the innocent
party can normally obtain the same or similar goods
elsewhere and claim damages if he has to pay more than
the contract price.
• But it may be granted if the goods are unique. It is most
frequent in property transactions, for example an order
that the seller is to transfer the title of a property to the
purchaser.
• Or in exceptional circumstances?

60. The defendants had agreed to supply the claimants with
petrol for their petrol stations. The defendants refused
to maintain supplies. The claimants sought specific
performance to prevent the defendants from withholding
supplies.
Do you think the order was granted?

61. Injunction
• A court order to prevent wrong doing under
the contract for example an unlawful
termination in breach of contract.
• You would need to show the other side had
acted unlawfully.
• You would also need to show serious
irreparable harm would be done to the
business if the other party was allowed to
continue acting in breach of contract and that
damages will not be an adequate remedy.

62. Question
Can you ever terminate a contract lawfully
without giving proper notice and without being
in breach?

63. • If the other party is in breach of contract and their breach
is ‘material’ in nature, you may be able to elect to
terminate the contract and treat yourself as discharged
from your obligations under the contract.
• Can be risky. You must get it right. Not every breach of
contract has this effect.
• If the court does not consider the breach you relied on to
be material, your own actions in either withdrawing from
the contract or refusing to perform your obligations under
the contract could themselves constitute a material
breach, exposing you to a claim for losses suffered by the
other party.
• So what sort of breaches do the courts consider to be
material?

64. • P operated an interactive gaming business over mobile
phones and the internet. G hosted several websites
including the official website of the Professional
Footballer’s Association (PFA).
• P and G then entered into a Sponsorship Agreement. G
was to provide targeted marketing opportunities consisting
of sending 12 email programmes to the email addresses
of at least one million opted-in recipients and six text
message programmes to the mobile devices of at least
250,000 opted-in recipients.
• G used ‘bought in data’.
• The essential purpose of the agreement was access to
commercial opportunities associated with the PFA fan
awards.
• The use of ‘bought in data’ constituted a material breach.

65. • E and F entered into a sponsorship contract.
• E were to be the most prominent brands associated with F and
were entitled to have its naming and livery rights. One particular
sponsor within E was to be the sole and official airline
associated with F.
• F rebranded, changed its name and created a stronger affiliation
with another country with its own airline.
• At first instance, the court found there had been no material
breach of the contract. Furthermore, as E had been aware of
events and had neither complained about them nor invoked a
contractual right to give notice requiring the breaches to be
remedied, E was deemed to have waived the breaches.
• The Court of Appeal found there had been an accumulation of
repeated or continuing breaches which had ultimately become
repudiatory.

66. • G and T entered into a distribution agreement.
• All brands sold by G to T were intended for final sale via
distributors to consumers in territories defined in the agreement.
T was subject to a number of obligations designed to ensure
that products were not smuggled into the UK.
• T was obliged to conduct its business in accordance with G’s
policy on international trade and to procure that any sub
distributors also conducted business in accordance with that
policy.
• T was required to keep full, proper and accurate accounts.
• A substantial proportion of goods supplied by G to T were
seized by customs.
• G gave notice to terminate the agreement.
Do you think in the circumstances G’s termination was lawful or
unlawful?

67. • The court held T was in serious and
continued breach of its obligation to conduct
its business in accordance with G’s policy on
international trade and to procure that any
distributors within the territories did likewise.
The breaches were highly material and
irremediable. G had been entitled to terminate
the agreement.

68. • Where you believe the other party to a contract is
in breach, be careful not to prejudice any right
you may have to terminate the contract.
• Be careful not to act in any way which could be
regarded as ‘affirming’ the contract (thereby
waiving the breach) as this may result in you
losing your right to terminate.
• Oil giant Shell lost the right to recover $15 million
when Centurion breached a contract because
Shell made a mistake when following the
contract’s termination procedure.

69. • Centurion secured concessions to engage in
petroleum exploration and exploitation in Egypt.
• Shell entered into a joint venture with Centurion
to explore for gas in the concession areas and
develop the gas for export.
• Shell paid Centurion US $15 million.
• The intention of the parties was that Shell should
acquire a 50% interest in each of the concession
areas. However ‘Closing’ under the agreement
never occurred and Shell’s anticipated 50%
interest in the concessions never vested.

70. 3.1.8 ‘…if the Closing Date has not occurred
within nine (9) months following the Agreement
Date, then Shell may elect, by giving thirty (30)
days notice in writing to Centurion, to terminate
this Agreement.’
Centurion committed a serious material breach
under the Agreement.

71. ‘We note that the Closing Date has not occurred within
9 months of the Agreement Date and Shell now issues
notice of its election to terminate the FIA. Termination
will become effective 30 days after the date of this
letter.
We also note that we have not received information
from Centurion that Centurion has received formal
notification from the Government of its consent to the
CTIP Acquisition and we therefore understand that the
CTIP Acquisition has not been completed.
In the circumstances, in accordance with the terms of
Clause 3.1.9, Centurion shall refund any and all
payments made by Shell.’

72. Shell was mistaken. The CTIP acquisition had
happened. As a result, Shell was not entitled to invoke
clause 3.1.9. However, the act of termination pursuant
to the contract affirmed the continuing existence of the
contract, which the CA said had the effect of depriving
Shell of the chance to rescind the contract and claim for
the return of its $15 million investment.
Mr Justice Tomlinson
‘When Shell sent the Termination Letter a mistake was
made. Indeed, it is obvious that Shell had made a
mistake, it must have been obvious to Centurion
however surprising they may have found it.’

73. Mr Justice Tomlinson
‘I can see no reason why Shell could not have
served a notice which accepted the repudiatory
breach as terminating the contract but, in the
alternative, in case they were wrong in
asserting that Centurion were in repudiatory
breach, exercise the contractual right to
terminate afforded by clause 3.1.8’.
Quite an expensive mistake to make!

74. • G and B entered into a contract for the construction and
purchase of an aircraft.
• B did not tender the aircraft for inspection on the
contractual ‘readiness date’.
• After a period of 90 days of ‘non-excusable’ delay G
served notice of termination and sought reimbursement of
the instalments of the purchase price it had paid.
• B argued G’s notice of termination was ineffective and
claimed payment of the final instalment of the purchase
price.
Do you think the CA was willing to find in the
circumstances that the breach was material and therefore
the notice of termination was valid?

75. • The court held G was only entitled to terminate the
contract if G had first served a written notice under
the contract giving the seller the opportunity to
remedy the breach.
• The difference in this case is that the contract
expressly said that the buyer was not entitled to
terminate the contract forthwith but could only do so
by first serving a written notice specifying the default
or breach and granting the seller the opportunity to
remedy it.

76. (1) Deciding whether or not, and if so, how to terminate a
contract requires careful consideration. Do you have the
right to terminate?
(2) You must carefully consider whether the other parties’
breach of the agreement justifies termination, otherwise
you could find yourself to be in breach.
(3) Act quickly.
(4) Do not do anything to prejudice your position such as
affirming the contract or waiving any breach.
(5) Carry out a review of all your contractual arrangements.
Are there any opportunities to terminate an agreement
that has become commercially unattractive or unviable?
(6) Document everything, just in case!
(7) Seek our advice.

77. Questions