On the fourth day of Christmas, the High Court gave to me…four contracts
With Advent upon us, and Christmas on the horizon, RPC takes a musical look back at the most important English judgments of 2018. Liability for all failures of numbering, rhythm and rhyme is hereby excluded.
Questions of contractual interpretation can be hard nuts to crack. We pick out today some nuts that you might find at the bottom of your legal stocking this year.
- The walnut (the one with two halves)
What happens if your contract has a clause prohibiting oral variation, but the parties then agree orally to vary it anyway? Is the variation ineffective? Or is the express oral variation combined with an implicit variation of the prohibition on oral variation? Resolving the mixed case law on this point, the Supreme Court in Rock Advertising v MWB Business Exchange Centres held firmly that variation in these circumstances is ineffective (see here for more detail).
- The Brazil nut (the hard one)
Can you assign a contract if it contains a prohibition on assignment? The House of Lords said no in 1993. Since then, many cases have sought to find a way to give effect to apparently prohibited assignments. This year, in First Abu Dhabi Bank v BP Oil International, the Court of Appeal overturned the High Court's decision by distinguishing between assignment of the rights under the contract (prohibited) and assignment of the monies received under it (not prohibited) (see here for more detail on the case). Since then, we now have the Business Contract Terms (Assignment of Receivables) Regulations 2018, which render void prohibitions on assignments of receivables (see here for some thoughts on the Regulations before they came into force). This seems destined to be a tricky area for some time to come.
- The (old) chestnut
English law requires each party to a contract (or contract variation) to give consideration in order for the contract (or variation) to be effective, unless it is signed as a deed. Are practical benefits good consideration? Historically, the courts have said no. However, since 1989, when the Court of Appeal accepted that the practical benefit of keeping a contractor performing his existing obligations when he was in financial difficulties was good consideration, the courts have wrestled with what practical benefits may be sufficient. This year, in Simantob v Shavleyan, the court strained the bounds of practical benefits to the utmost to find a variation of a settlement supported by good consideration and therefore binding (see here for more details). There was some hope that the Supreme Court might deal with the question for once and for all in Rock Advertising (the second half of the walnut, as it were) – but it ducked the opportunity. We'll have to wait for the Supreme Court to get out the nutcrackers on another case.
The Twelve Judgments of Christmas (2018)
On the first day of Christmas, the High Court gave to me… a privilege in E-N-RC.
On the second day of Christmas, the High Court gave to me…two LIBOR reps.
On the third day of Christmas, the High Court gave to me…three corporate crimes.
On the fourth day of Christmas, the High Court gave to me…four contracts.