Grade: Very Competent (VC)
IN THE PROPOSED MATTER
Laing Allfrey Limited Proposed Claimant
Chester College Limited Proposed Defendant
- I am asked to advise Laing Allfrey Limited (‘LA’), on a dispute regarding the early termination of part of a contract by Chester College Limited (‘the College’). The advice sought is specific to:
- Whether, as a matter of interpretation, the words “any breach” in clause 5.2 would be construed as not including the minor breaches relied upon by the College in its Letter of 21 July 2020;
- Whether by virtue of section 3(1) and 3(2) (b) (i) of the Unfair Contract Terms Act 1977 the College could be said to have terminated the contract in circumstances which LA could not have reasonably expected;
- Whether section 3(1) and 3(2)(b)(ii) of UCTA 1977 prevent the College from relying upon clause2 of the contract as justifying termination of the contract in the circumstances of this case; and
- What LA may seek to recover by way of damages, should Chester College have wrongfully terminated any part of the
- Laing Allfrey Limited is a building and garden maintenance company in Chester which has carried out building and garden maintenance in the area for over 20 years.
- LA has 2 directors, Benjamin Laing and Bill Allfrey. Mr Laing’s expertise is in gardening and Mr Allfrey’s is in building repair and maintenance.
- Chester College Limited is a privately run College which provides courses (residential and non-residential) for graduates studying for professional examinations.
- In Autumn of 2019, The College advertised for a contractor to provide property and garden maintenance and services for the next 2 years. Mr Laing approached the College’s Administrator, Sam Staple. Who explained that the College buildings had recently been refurbished and modernised and that he was now looking for a contractor to undertake routine maintenance and repair. The work was to be in two parts.
- First, there was the maintenance of the College buildings themselves. The contractor was to provide at least one person on site each Monday and Friday between 9 am and 6 pm and to provide an on-call service at other times so that any faults or items that required attention would be attended to within 24 hours. Second, the grounds were to be maintained.
- LA made an offer to the College for the contract. The offer made was to provide the site presence for £2,000 per month and the on-call service at the rate of £20 per hour (excluding travelling time). The offer for the garden maintenance was £1,500 per month.
- In November 2019, Mr Staple telephoned Mr Laing and told him that the College had decided to award the contract to LA.
- When LA received the contract, it did not include the expected, fixed 2-year period. The contract instead contained clauses which stipulated that the College was entitled to terminate before the end of 2020 for “any breach”.
- LA Sought advice from their Solicitor Mr John Reynolds as no previous mention had been made of early termination.
- Mr Reynolds in correspondence with the College’s Solicitors, explained LA’s concerns in regards to the terms. On the 18th of December, via letter, the College’s solicitors ensured Mr Reynold’s that they would act honourably.
- In reliance on the assurance, LA entered into a written contract with the College to provide building and garden maintenance services.
- At the beginning of 2020 LA faced some issues in undertaking the work and had some breaches of contract, which they describe as “minor”
- On 21 July 2020, the College served notice to LA to terminate part of the contract on 22 August 2020 under clause 5.2.
- LA provides that they are suffering substantial loss as a result of the termination and thinks that the College has not acting fairly or properly in terminating the contract.
- Clause 5.2 of the contract stipulates that, “any breach of this contract, whether repudiatory or not, the college may serve notice to terminate…” In the case of Rice (t/a The Garden Guardian) v Great Yarmouth Borough Council  (‘Rice’), the Court of Appeal in an effort to preserve “business common sense”; found that, termination for “any breach” was restricted to repudiatory breaches or an accumulation of breaches that as a whole can properly be described as repudiatory.
- The court will not strive to give effect to the literal meaning in a commercial contract, especially since LA, according to Mr Reynolds; invested substantial money in recruiting staff and machinery in undertaking the contract. Therefore, irrespective of the wording of the terms of termination in the College’s contract, it is unlikely that the court would treat the term “any breach” literally but instead would require that it be shown that it was a repudiatory breach.
- A breach of condition is generally repudiatory, as such breaches go to “the root of the contract.” A breach of warranty would not be held to be a repudiatory breach. The College is relying on the breach of clause 5.2 to terminate the contract. However, the College did not characterise any particular term as a condition or indicate which terms are to be considered so important that “any breach” will justify termination.
- Where it cannot be shown that a term is a condition or warranty, it will be treated as an innominate term. The breach of an innominate term “may” be a repudiatory breach.
- The case of Hong Kong Fir Shipping Ltd v Kisen Kaisha (1962) established a test for ascertaining when a breach of an innominate term would amount to a repudiatory breach. The case suggests that the court should look to the effect of the breach and ask if the breach has substantially deprived the innocent party of the whole benefit of the contract. Where this is answered affirmatively, it is a repudiatory breach. I will address each alleged breach in turn below to ascertain whether it was a repudiatory breach.
Breach of Clause 3
- According to the College, LA failed to carry out work to the its satisfaction, as required by clause 3. Rice explains that this is a classic example of an innominate term “one which can be broken in so many different ways and with such varying consequences that the parties cannot be taken to have intended that any breach should entitle the innocent party to terminate the whole contract” The clause is so broad that taken at face value, it would mean that LA would be in breach for the most trivial of matters. It is unlikely that the court would give effect to such a term standing on its own.
Breach of Clause 2.3
- In the termination letter the College provided that LA failed to attend to faults within 24 hours, as required by clause 2.3. As explained in Bunge Corporation v Tradax Export SABased, the normal rule in commercial cases is that stipulations as to time of performance are generally crucial. However, the case of Rainy Sky SA v Kookmin Bank  provides that the importance of a time stipulation in fulfilling the contract, is what will be considered to ascertain the severity of the breach.
- The facts provide that during that period, there was an unexpectedly large number of occasions when LA was called out as part of the on-call service. Further, due to work ineffectively done by the previous contractor, parts of the building were damaged and badly repaired. It seems that Mr Allfrey was required to attend the premises up to 3 to 4 days a week rather than the 2 provided for in the contract. It is my opinion that the breach of the time stipulation does not go to the root of the contract and does not deprive the College of the whole benefit of the contract; as all the on-call repairs were completed despite the demand.
Breach of Clause 2.5
- Based on the facts, the college terminated the contract due to breach of clause 2.5. LA hired an experienced gardener to cover for Mr Laing while he was away on vacation. The College provides that in breach of clause 2.5 the gardener did not mow the lawn, or grass sports pitches and courts at least once a week (between 1 March and 31 October) as required, neither did he plant any seasonal flowers. At the time of breach, it is noted that the “the grass would not have been growing in the dry weather and any new plants would have been killed off by the strong sun.” this was compounded by the fact that, at the time in question there was a “hosepipe ban” (Further information is required from client as to the facts of said ban).
- The College could not have expected clause 2.5 to be fulfilled as the extreme weather conditions did not permit it. It may be argued that steps could have been taken by the gardener to mitigate the effects aforementioned, for example using a watering can in replacement of a hose. However, in my opinion, the aforementioned clauses are not are not central to the existence of the contract as the breach would have trivial consequences on the college, and would not deprive the college of the whole benefit of the contract. Therefore, it is unlikely that it would be a repudiatory breach. Nevertheless, it is important to ascertain the loss (if any) the college incurred as a result of the breach to understand its full effects.
An Accumulation of Breaches
- In Rice, it was further provided that “Cumulative breaches that justify an inference that the contractor would continue to deliver a substandard performance in relation to substantial portions of the contract could, be assessed as repudiatory.” As mentioned above, the breach of clause and 2.3 and 2.5 are unlikely to be considered as repudiatory and therefore will not have a cumulative effect.
- A minor breach of an important term, a condition, would entitle the College to terminate the contract due to repudiatory breach. However, based on the facts it is unlikely that there are any repudiatory breaches as, as the clauses mentioned above are innominate and do not go to the core of the contract.
3(2)(b)(i) of the Unfair Contract Terms Act 1977
- Section 3(1) and 3(2)(b)(i) of the Unfair Contract Terms Act 1977(‘UCTA’), provides that on the other’s written standard terms of business, a party, cannot by reference to any contract term, claim to be entitled to render a contractual performance substantially different from that which was reasonably expected of him.
Written Standard Terms of Business
- Section 3 applies if one party deals on the written standard terms of the other party. In Yuanda (UK) Co. Ltd v WW Gear Construction Ltd  EWHC, it was found that, terms will be considered, “standard terms of business” where, the company in question uses the terms for all, or nearly all, of its contracts of a particular type without alteration. This essentially means that the terms are not varied for every contractual engagement but instead remain standard for each transaction.
- Based on the facts, L.A is dealing on the written standard terms of the College. In a letter to L.A, on the 18th of December, the College stated “As to clause 5.2, these are standard terms commonly (in our experience invariably) used by Colleges of advanced education.” Although L.A had concerns about clause 5.2, the terms were not varied by the College to accommodate the transaction.
- Section 11(1) of UCTA provides that reasonableness is assessed, as to whether the term is a fair and reasonable one to have been included in light of circumstances known, or circumstances that ought to have been known to the parties at the time of contracting. What matters is reasonable expectations; that is to say the objective standards of the reasonable person. 11(5) provides that, the burden of proof would lie on the College to show that the performance was reasonably expected.
- In Phillips Products Ltd v Hyland  1 WLR 659, it was provided that there is no precedence per say for reasonableness; instead, reasonableness will depend on the specific circumstances of the contract between LA and the College. Nevertheless, Schedule 2 of UCTA provides guidelines on reasonableness. The factors that should be considered are:
- The strength of the bargaining positions of the parties relative to each other.
- Whether the customer received an inducement to agree to the terms and whether they could have entered into a similar contract with another seller without that term.
- Whether the customer knew or ought reasonably to have known of the existence and extent of the term.
Strength of Bargaining Positions
- In regards to LA’s bargaining power, they have been in the business of building and garden maintenance in Chester for over 20 years. As previously mentioned, Mr Laing has expertise in gardening whiles Mr Allfrey is an expert in maintenance. According to my instructions, “LA has a good reputation in the locality for efficient, economical and good quality work”. This may mean that LA is well versed in business tactics and dealing with similar contracts
- However, LA is a smaller organisation when compared to the College, whose structure comprises of buildings 300 years old, which occupies 5 acres of land. According to the facts, LA sought to expand the business. Therefore, it would seem that the College may be their first client of such magnitude. Further information is required as to the types of contracts LA previously undertook and who was their clientele base.
- The facts make mention of LA being the lowest bidder for contract with the College. However, there is no mention of how competitive the post was or what influenced LA to bid at the rate which they did. This information would be helpful to ascertain the extent of inequality in bargaining power. Nevertheless, I am of the opinion that the College was able to enforce its terms on LA with little to no contractual negotiation, due to inequality in bargaining power.
Inducement to Agree to the Terms
- Based on the facts, when LA received the contract, they noted that instead of being for a fixed 2-year period, the contract contained clauses which entitled the College to terminate before the end of 2020, as found in Clause 5.2. LA, in opposition to the terms, LA contacted the College via their solicitor to explain their concerns. In response the College’s Solicitor’s provided that, the College would act “honourably”. It seems that LA signed the contract based on this assurance. Moreover, as LA has been in the business for 20 years, with the relevant expertise; there is little doubt that they could have entered a similar contract, which did not include the term in question.
Ought Reasonably to have known
- Although LA Knew of the existence of clause as found in the contract mentioned above. The extent to which the College intended to apply the terms was unknown by the business. It is my opinion that LA could not have been reasonably expected to know that the college would attempt to utilise clause 5.2 to terminate the contract for a minor breach, which were as a result of situations, which based on the facts seemed unavoidable.
- It is my opinion that the College has not only rendered the contractual performance substantially different, but has done so unreasonably. The guidelines above, give weight to this opinion as they establish that, there was inequality in bargaining power between the 2 parties, LA was induced into signing the contract and LA could not have been reasonably expected to know the extent to which the College intended for the terms to apply. The term was therefore unreasonable and as such unenforceable. This would mean that the College wrongly terminated the contract with LA.
- In my opinion, it seems that the termination of the gardening services by the College was wrongful and as such a breach of contract. LA is therefore able to claim contractual damages incurred as a result of the partial termination. The facts show that LA made substantial investments to get machinery and workers to undertake certain aspects of the contract. Therefore, the company may be able to claim any costs incurred in hiring the workers and buying the machinery, for the part of the contract terminated (further information is required as to the sum). Moreover, LA’s monthly payment for providing the gardening services was £1500; the company may be able to claim for future earning, for the remainder of the 2-year contract. Pursuant to section 69 of the County Courts Act 1984, LA would be able to claim interest on the damages due.
- The partial termination is a repudiatory breach. Therefore, alternatively, LA is entitled to terminate the entire contact with the College and claim for damages as a result of breach of the entire contract.
- Before issuing a claim at court, L.A should engage in pre-action protocols. As per paragraph 6 of the Practice direction on Pre-action conduct and protocols, LA should, through their solicitor, exchange correspondence and information with the College to;
- understand each other’s position;
- make decisions about how to proceed;
- try to settle the issues without proceedings;
- consider a form of Alternative Dispute Resolution (ADR) to assist with settlement;
- support the efficient management of those proceedings; and
- reduce the costs of resolving the dispute.
- ADR may be particularly beneficial to LA if they intend to maintain a contractual relationship with the College and continue providing services of maintenance. According to the pre-action protocol and the overriding objective, litigation should be considered as a last resort. Therefore, LA and the College should consider the various forms of ADR available to settle the matter. Based on the facts of the case, I would recommend a non-adjudicative option, particularly negotiations.
- Negotiations are very flexible and will provide LA with some degree of control in regards to the outcome. Furthermore, any agreement reached will be binding on both parties.
- The following evidence or documents are requested;
- Bids made for the College’s contract; to ascertain competitivity of the post (bargaining power).
- LA’s previous clientele base; types of contracts previously held.
- Medical evidence of Mr Allfrey’s injury.
- Contract of Gardener used to cover, and proof of qualification.
- Contract of all staff recruited.
- Literature on the Hosepipe ban in July 2020.
- Proof of any loss suffered by LA as a result of the termination.
- As requested above, the first and most important step is the compilation of the evidence set out above with a view to giving clearer advice.
- Based on the pre-action protocols set out in 40; LA and their solicitors should discuss initiating correspondence with the College, in order to commence pre-action protocols in a timely manner.
- In my opinion, and in reliance on case law, the term “any breach” is restricted to repudiatory breaches or an accumulation of breaches that as a whole can properly be described as repudiatory. In my opinion the breaches mentioned in the termination letter do not amount to a repudiatory, as they do not go to the core of the issue, neither do they deprive the College of the whole benefit of the contract.
- It is my opinion that the College was unreasonable in rendering the contractual performance substantially different from which was expected. As the term is unreasonable it is therefore also unenforceable. Meaning that the College wrongly terminated the gardening services provided by LA contract and are thereby in breach of contract.
- Therefore, LA are entitled to damages for the partial breach of contract and are also entitled to terminate the contract as the breach amounts to a repudiatory breach.
6th March 2020
Red lane Street
This is a sample Opinion Writing of Marcellina Jouavel; this is a Very Competent (VC Grade) piece of work. Consent has been given to use this piece of work solely for educational purposes. This should not be copied or used in any other manner except for understanding how barristers use this in their work, and how bar course students use this on the bar course. You must not copy any part of this work as your own. Any act of copying or other action that constitutes copying will be considered as academic misconduct, and a breach of the author’s and Alignthebar’s Intellectual Property Rights.