The hirer took delivery of a vehicle under an HP contract. he plaintiff exercised a contractual right to terminate the hiring and take possession of the vehicle when the defendant failed to pay the first two monthly instalments.
Held: Where an owner determines a hire purchase agreement in exercise of a right so to do given him by the agreement, in the absence of repudiation he can recover damages for any breaches up to the date of termination but not thereafter, and a ‘minimum payment’ clause which purports to oblige the hirer to pay larger sums than this is unenforceable as a penalty.
Lord Denning MR said: ‘Undoubtedly the cases in the past give rise to some conflict, and therefore I will try to state the matter on principle. It seems to me that when an agreement of hiring is terminated by virtue of a power contained in it, and the owner retakes the vehicle, he can recover damages for any breach up to the date of termination but not for any breach thereafter, for the simple reason that there are no breaches thereafter’. And ‘Seeing that they can no longer rely with any confidence on the ‘minimum payment’ clause, the owners have reverted recently to a claim for damages under the general law. But they can only do so, it seems to me, subject to the general principle which I have already stated, namely, that when they terminate the hiring and retake the vehicle, they can only get damages for any breaches up to the date of termination but not thereafter’.
Diplock L.J said: ‘In the present contract clause 8 itself merely defines a number of events, the occurrence of any one of which gives the owners an option to bring the contract to an end. Clause 11 purports to confer upon the owners other rights upon exercising their option to bring the contract to an end, but this clause is void as a penalty clause, at any rate in so far as it purports to confer rights upon the owners in the events which in fact gave rise to their right to bring the contract to an end, namely the hirer’s breach of contract in failing to pay two instalments of hire. The owners are, therefore, in my opinion, forced to rely upon their ordinary remedies for those breaches of contract which had accrued at the date when the contract was determined, viz., April 7, 1960.
I have already expressed my opinion that on that date the only causes of action which had accrued to the owners were for the two instalments due on February 25 and March 22, I960, then in arrear. There had on April 7, 1960, been no repudiation by the hirer of his contract and no fresh breach by him which went to the root of the contract so as to evince his intention no longer to be bound by it. The owners’ remedy is accordingly limited to recovery of the two instalments, together with interest thereon at the agreed rate of 10 per cent per annum from the dates they respectively fell due’.
Judges:
Lord denning MR, Diplock LJ
Citations:
[1963] 2 QBD 104, [1963] 1 All ER 443, [1963] 2 WLR 359
Jurisdiction:
England and Wales
Cited by:
Distinguished – Lombard North Central v Butterworth CA 31-Jul-1986
The defendant entered into a hire-purchase contract for a computer, time being stipulated to be ‘of the essence’ in relation to the payment obligations. He defendant defaulted, and the plaintiff took possession of the goods, and and sought payment . .
Cited – Phones 4U Ltd v EE Ltd ComC 16-Jan-2018
The parties contracted for the marketing of contracts for the marketing of the defendant’s mobile phone contracts. On the claimant entering administration, the defendant exercised a clause in their contract to terminate the contract. The claimant . .
Cited – Phones 4U Ltd v EE Ltd ComC 16-Jan-2018
The parties contracted for the marketing of contracts for the marketing of the defendant’s mobile phone contracts. On the claimant entering administration, the defendant exercised a clause in their contract to terminate the contract. The claimant . .
Lists of cited by and citing cases may be incomplete.
Contract, Consumer
Updated: 18 May 2022; Ref: scu.458601