A recent High Court judgment may provide some help to fashion businesses which have entered into poorly drafted contracts.

The judgment concerned a claim by a Singaporean distributor of Manchester United branded fragrances and toiletries against its UK supplier.  It had entered into the distributorship agreement on the back of various claims by the supplier, some of which were untrue.  It was then faced with the supplier:

  • withdrawing some lines after the distributor had started to market them;
  • delaying supply of products;
  • attempting to renege on some rights granted to the distributor;
  • failing to respond to enquiries made by the distributor; and
  • providing false information as to the pricing of the products in the Singapore market.

But the distributorship agreement has been written on little more than the back of a large envelope.  It consisted of just 8 clauses.

To the rescue, the judge found that a duty of good faith was to be implied with the distributorship agreement.  He awarded damages to the distributor for breach of this duty.  This was despite the fact that English law historically has been very reluctant to entertain such a concept in contracts generally.

Going forwards:

  • where the contract envisages a long term relationship between the parties,
  • the contract is poorly drafted,
  • the defendant has played fast and loose with the claimant, and
  • the facts suggest that it was intended by the parties that both of them would be subject to a duty of good faith,

it can be expected that this judgment will be relied on – particularly by smaller parties – to plug the holes in bad contracts.

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