Boris Ignachkov Legal Principles and Key Points
- In the case of L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235, the courts ruled on the meaning of a contractual clause and whether D made a fundamental breach of contract.
- This contract case involved contract terms, conditions, breach and manufacturers.
Facts of the Case
- D was responsible of distributing C’s panel presses. C and D contracted to ensure there would be weekly visits by D’s representatives to manage the panel presses.
- D failed to uphold this contractual obligation so C terminated the contract citing clause 11(a)(i) when doing so.
- D contended in this appeal that the contract should not have been terminated.
Issues
- What is the difference between a term and a condition?
- Does the contractual breach lead to repudiation?
- Does the conduct of the contract parties impact the interpretation of a contract?
Held by House of Lords
- Appeal dismissed – C is not entitled to rescission of contract but the contract is rather unclear.
Lord Reid
Definition of condition
- D failed to make weekly visits but it would be unreasonable to hold that clause 7(b) was a condition.
- “A condition in that sense is not some-thing which has an automatic effect. is a term the breach of which by one party gives to the other an option either to terminate the contract or to let the contract proceed and, if he so desires, sue for damages for the breach. Sometimes a breach of a term gives that option to the aggrieved party because it is of a fundamental character going to the root of the contract, sometimes it gives that option because the parties have chosen to stipulate that it shall have that effect.”
- “The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear.”
Lord Wilberforce (dissenting)
Term or condition?
- Appeal should be allowed because clause 7(b) is a condition not merely a term.
- “To call the clause arbitrary, capricious or fantastic, or to introduce as a test of its validity the ubiquitous reasonable man (I do not know whether he is English or German) is to assume, contrary to the evidence, that both parties to this contract adopted a standard of easygoing tolerance rather than one of aggressive, insistent punctuality and efficiency. This is not an assumption I am prepared to make, nor do I think myself entitled to impose the former standard upon the parties if their words indicate, as they plainly do, the latter.”
- “I note finally, that the result of treating the clause, so careful and specific in its requirements, as a term is, in effect, to deprive the appellants of any remedy in respect of admitted and by no means minimal breaches. The arbitrator’s finding that these breaches were not “material” was not, in my opinion, justified in law in the face of the parties’ own characterisation of them in their document: indeed the fact that he was able to do so, and so leave the appellants without remedy, argues strongly that the legal basis of his finding – that clause 7(b) was merely a term – is unsound.”
