This is a case read with interest following PW-LA recently acting for a party where there was an entire agreement clause within a contract. An entire agreement clause is a provision in a contract that stipulates that the written contract represents the complete and final agreement between the parties, thereby excluding any prior or contemporaneous oral or written statements or agreements that are not included in the contract. This means that the court, when interpreting the contract, is limited to the terms within the written document and cannot consider pre-contractual communications or negotiations. However, where there is such a clause it does not prevent a claim for fraudulent misrepresentation; a party cannot limit or exclude its liability for its own fraudulent misrepresentation in inducing a contract– whereas a negligent misrepresentation if established would not override the entire agreement clause.
The case of Advanced Multi-Technology for Medical Industry and others v Uniserve Ltd and another [2024] EWHC 1725 (Ch) is where face masks were supplied during the COVId-19 pandemic.
Key Legal Findings
· Hitex did not make any fraudulent or negligent misrepresentation that induced Uniserve to enter into the Supply Contract.
· Maxitrac/Dr. Stead had authority from Uniserve to agree to the Revised Schedule, which amended the delivery dates under the Supply Contract.
· Hitex did not breach its obligations under the Revised Schedule.
· Uniserve wrongfully renounced the Supply Contract in mid-July 2020, which amounted to an anticipatory breach that Hitex accepted, terminating the contract.
· Hitex is entitled to damages based on the market price it could have obtained for the remaining undelivered masks in mid-July 2020.
Material Facts
Hitex, a Jordanian manufacturer, entered into a Supply Contract with Uniserve in April 2020 to supply 80 million face masks during the COVID-19 pandemic.
Hitex failed to meet the initial delivery schedule, leading to Maxitrac/Dr. Stead agreeing to a Revised Schedule on Uniserve's behalf in late May 2020.
Uniserve's own inspections indicated that Hitex was meeting the requirements of the Revised Schedule as of mid-June 2020.
In mid-July 2020, Uniserve communicated to Hitex that it considered the contract terminated due to Hitex's alleged failure to deliver.
Hitex ceased manufacturing masks for Uniserve after mid-July 2020 but maintained it was ready and willing to perform the contract.
The Law
Misrepresentation Act 1967- Fraudulent misrepresentation occurs when a false representation is made knowingly, without belief in its truth, or recklessly as to whether it is true or false Misrepresentation. This type of misrepresentation is founded in the tort of deceit, and the claimant must prove that the representor had an intention to deceive.
The remedies available for fraudulent misrepresentation include rescission of the contract and/or damages, aimed at restoring the claimant to the position they would have been in had the misrepresentation not occurred. It should also be noted that where there is fraudulent misrepresentation if a contract contains an entire agreement clause which excludes any statements made outside of the contract that these do not apply where fraudulent misrepresentation is established.
Negligent misrepresentation, on the other hand, arises when a representation is made carelessly or without reasonable grounds for believing its truth. Under the Misrepresentation Act 1967, section 2(1), a claimant may seek rescission and/or damages if they can demonstrate that the representor did not have reasonable grounds to believe the information was true at the time the representation was made. Unlike fraudulent misrepresentation, the court has discretion under section 2(2) of the Misrepresentation Act 1967 to award damages in lieu of rescission, considering the nature of the misrepresentation and the losses involved.Both types of misrepresentation require the claimant to prove that the misrepresentation was a material factor in inducing them to enter into the contract. However, the key difference lies in the mental state of the representor and the level of proof required. Fraudulent misrepresentation demands proof of intent to deceive, while negligent misrepresentation requires showing a lack of reasonable grounds for belief in the statement's truth.
Sale of Goods Act 1979, section 50- Section 50 of the Sale of Goods Act 1979 outlines the provisions for damages for non-acceptance of goods by the buyer. Specifically, it states that if a buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against the buyer for damages for non-acceptance. The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer's breach of contract. Furthermore, if there is an available market for the goods in question, the measure of damages is primarily determined by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for acceptance, at the time of the refusal to accept.
Section 50, continues to provide a clear framework for calculating damages in cases of non-acceptance. The concept of an 'available market' plays a crucial role in determining the measure of damages, where it implies a market situation where the goods could freely be sold and there is sufficient demand to absorb the goods readily, thus allowing for an easy disposal of the goods if a purchaser defaults.
In practical terms, this means that the seller can claim damages based on the loss of the bargain they were entitled to under the contract, which is quantified by comparing the contract price with the market price at the relevant time. This approach ensures that the seller is compensated for the financial loss directly resulting from the buyer's failure to fulfill their contractual obligations.
Consumer Rights Act 2015 (CRA 2015). The Sale of Goods Act 1979 (SGA 1979) section 50 is not directly applied in the Consumer Protection Act - CRA 2015. The CRA 2015, which came into effect on 1 October 2015, largely supersedes the provisions of the SGA 1979 concerning consumer contracts for the sale of goods. The CRA 2015 redefines and restates the obligations and rights concerning goods supplied under consumer contracts, which were previously covered under the SGA 1979.
Section 50 of the SGA 1979 deals with damages for non-acceptance of goods where the buyer wrongfully neglects or refuses to accept and pay for the goods. Under the CRA 2015, while the general principles regarding the rights and remedies in consumer contracts for goods might still reflect the spirit of the SGA 1979, the specific provisions such as those in section 50 are not directly applied. Instead, the CRA 2015 provides its own set of remedies and standards for non-conforming goods, which include the right to reject, repair, or replace the goods. Furthermore, the CRA 2015 has introduced specific provisions that replace certain sections of the SGA 1979, such as the default delivery provision under SGA 1979, s 29, adapting them to modern consumer needs and simplifying the legal framework applicable to consumer goods This indicates a shift from the SGA 1979 to a more consolidated and consumer-focused legislation under the CRA 2015, which now governs consumer contracts for goods entered into on or after its effective date.
Relevant case law on agency, authority, estoppel, and contract termination
Submissions of the Parties
· Uniserve argued that it was induced to enter into the contracts by Hitex's misrepresentations about its ability to meet the delivery schedule, and that it lawfully terminated the Supply Contract due to Hitex's breaches. Uniserve also counterclaimed against Hitex, Maxitrac, and Dr. Stead.
· Hitex denied making any misrepresentations and argued that it did not breach the Revised Schedule. Hitex claimed damages from Uniserve for renouncing the Supply Contract.
· Maxitrac and Dr. Stead argued they had authority from Uniserve to agree to the Revised Schedule and were not liable for Uniserve's alleged losses.
Court Rationale
The court found that Uniserve failed to establish that the alleged misrepresentations were made by Hitex with the required knowledge or recklessness. The court also found that Maxitrac/Dr. Stead had actual or apparent authority from Uniserve to agree to the Revised Schedule.
Based on Hitex's production records and Uniserve's failure to properly inspect, the court concluded that Hitex did not breach its obligations under the Revised Schedule. Therefore, Uniserve's renunciation of the Supply Contract in mid-July 2020 amounted to an anticipatory breach, which Hitex accepted by ceasing production, terminating the contract.
The court determined that Hitex could have sold the remaining undelivered masks into the market in mid-July 2020, albeit at a lower price than the contract price with Uniserve, and was entitled to damages reflecting this loss of bargain.
The Decision
Uniserve's defence and counterclaim against Hitex were dismissed.
Hitex was awarded damages against Uniserve based on the market price for the undelivered masks in mid-July 2020, less costs saved.
Caramel and Mr. Popeck's claim for commission under the Commission Contract was dismissed.
Uniserve's claims against Maxitrac and Dr. Stead were dismissed.
Comments