Earlier this week, the Court of Appeal decided another interesting case involving contractual interpretation – this time interpreting and determining the scope of an indemnity clause. The case was one of the many fall-outs of the ongoing News of the World (“NOTW”) saga, and involved a claim brought by Mr Coulson, former editor of NOTW, against his former employers. On the termination of Mr...
Deliberate Repudiatory Breach and Exemption Clauses – Part II
An earlier post discussed the High Court decision in NetTV, which held that there is a presumption against an exemption clause in a contract also applying to deliberate repudiatory breaches, unless the clause was clearly intended to apply to such breaches. However, in a subsequent decision in June last year, Flaux J severely criticised the line of reasoning adopted in NetTV, considering it...
Deliberate Repudiatory Breach and Exemption Clauses – Part I
Earlier this year, the Court of Appeal granted leave to appeal from a decision of Flaux J in Shared Network Services v Nextiraone, on the basis that the case was a good vehicle to resolve an important question of law. Although there is no certainty as to whether this appeal will be heard, and if so, when, the question of law highlighted by the Court of Appeal is one of great significance for...
Computation of damages and the incidence of tax
The recent decision of the Court of Appeal in Capita Alternative Fund Services (Guernsey) Ltd v Drivers Jonas considered a peculiar set of circumstances in which the incidence of tax can be factored in when computing the damages suffered by a commercial party. The House of Lords had considered this question almost 60 years ago in BTC v Gourley, and laid down a set of guidelines to determine...
Indemnity clauses in intra-group asset transfers
The English Court of Appeal recently considered an interesting and important issue arising out of an indemnity clause in an agreement for a transfer of assets and liabilities between two wholly owned subsidiaries in a corporate group. Dealing with a scenario not uncommon in intra-group transfers of assets and liabilities, the Court of Appeal in Rust Consulting v PB [2012] EWCA Civ 1070 considers...
Guarantees and Performance Bonds
Payment obligations under commercial contracts are often secured by means of guarantees issued by banks, which guarantee the performance of the payment obligation by the buyer. For instance, if A and B enter into a contract whereby A agrees to sell B a ship for the price of $50 million, B’s bank may issue to a payment guarantee to A to secure the payment of this amount from B. In the...
Enforceability of side letters – a postscript
In an earlier post, we had discussed the decision of the English High Court in Barbudev v Eurocom on the issue of the enforceability of side letters. In April this year, the Court of Appeal upheld the ultimate decision of the High Court, departing however, from the reasoning adopted. As discussed in the earlier post, the key issue in the case was whether a side letter signed by the parties could...
Court of Appeal on the Law of the Arbitration Agreement – Part II
There are two ways of interpreting Moore-Bick LJ’s reasoning and conclusion, discussed in Part I: First, one could argue that this case is a reaffirmation and extension of the recent trend in English cases of applying the law of the seat to the arbitration agreement. The best example of this approach is the decision in C v D [2007] EWCA Civ 1282. Although this interpretation has...
Court of Appeal on the Law of the Arbitration Agreement – Part I
While we eagerly await the decision of the Indian Supreme Court in Bharat Aluminium, the English Court of Appeal has delivered a controversial but significant decision on the significance of the seat in international arbitration. In Sulamérica Cia Nacional De Seguros S.A. v Enesa Engenharia S.A. [2012] EWCA Civ 638, the insurance contract in question concerned a project in Brazil, was governed by...
Illegitimate pressure in economic duress
Traditionally, duress rendered a contract voidable only if it was physical duress (which involved a threat to the person or belongings of an individual), but following the decision of the Privy Council in Pao On v Lau Yiu Long, the concept of economic duress was also recognised. It is now fairly settled law that there are two essential ingredients for voiding a contract on grounds of economic...
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