This article gives a brief overview of some of the legal developments that occurred in commercial litigation in 2019 and the impact we expect them to have in 2020.
Brexit and Contracts
Given the current transition period, following the UK leaving the EU on 31 January 2020, Brexit is expected to continue to heavily influence legal developments.
In 2019, the High Court rejected the European Medicines Agency’s case that Brexit frustrated its 25-year lease of premises in Canary Wharf in Canary Wharf Ltd v European Medicines Agency [2019]. Contracts are rarely frustrated and this case appears to offer certainty that Brexit-related changes will not be found to have frustrated a contract and it is likely to discourage others using a similar argument. It is, however, anticipated that others may attempt to raise similar arguments that Brexit has caused a material adverse change to the contract or it has triggered a force majeure clause to come into effect; each case will be considered on its own merits, with attention being paid to how contract terms have been drafted.
Email Signatures
English courts are seemingly accepting any form of electronic signature to a commercial document as binding. In 2019, the Law Commission stated that a signature is any mark a person adds to a document to show their intention to be bound. In 2019, a County Court found that an email footer, which stated the sender’s name and contact details, was sufficient to meet the requirements for a signature to a contract dealing in land. It is, therefore, likely that there will be an increase in arguments that parties are bound to the terms of a contract where they have shown their intention to be bound using electronic communication but not necessarily ‘signed’ a document in the traditional sense.
Good Faith in Contracts
Traditionally, the English courts have avoided implying a duty of good faith into commercial agreements. In 2019, however, we saw an increase in litigation with parties arguing an implied duty of good faith in contracts where the parties are ‘relational’. Relational means where there is a relationship between the contractual parties, for example, in the case of Bates v Post Office Ltd (No. 3) [2019], which involved contracts between the Post Office and its office managers. In this case, it was found that there was an obligation to ‘refrain from conduct which in the relevant context, would be regarded as commercially unacceptable by reasonable and honest people’. Good faith obligations can often be crucial to prevent one party to a bargain taking an unfair advantage over the other by acting solely in its own commercial self-interests while technically not breaching the express terms of the contract.
Case law surrounding implied duties of good faith are still developing and it is expected that we will see more cases in 2020. It is important to stress, however, that it remains important that there is a relationship between the parties; an implied duty of good faith is not going to be successfully argued for all commercial contracts. It is, however, hoped that it will introduce a fairer way of conducting business.
Rectification
Where parties to a commercial contract made a mistake drafting a contract, they are able to correct it through rectification, this means it is open to a party to argue a contract should be rectified to reflect the parties original intentions. Until last year, the Court of Appeal and Supreme Court were suggesting that the approach to rectification cases was to consider what the reasonable observer would have understood the parties’ intentions to be. However, in 2019 the Court of Appeal held that it is the parties’ actual intentions that should be considered. This means that in rectification cases, going forward, evidence of parties private believes are now admissible and it might be that in 2020 we are looking through correspondence to work out how the final contract came to be worded in such a way.
Illegal Contracts and Property
Case law (Patel v Mirza [2016]) has established that property can pass under an illegal contract unless statute expressly or impliedly forbids it. This ground was applied by the Court of Appeal in 2018 in Stoffel & Co v Grondona [2018]. The appeal is due to be heard in May 2020 and it is hoped that the decision may refine the existing test and how it is used.
Nockolds will be eagerly following the legal developments in the courts closely in 2020 and will be sharing our thoughts via our blogs and social media.