A hire purchase agreement provided that if the hirer should go into liquidation, and the owner should retake possession, the hirer would pay a sum by way of compensation for depreciation.
Held: The provision for the payment of compensation was not a fraud on the bankruptcy laws as giving the owner company an undue advantage in the event of the hirer company going into liquidation. The provision was not a deliberate device to secure that more money went to the creditor: ‘it would be extravagant . . to suggest that this clause is aimed at defeating the bankruptcy laws or at providing for a distribution differing from that which the bankruptcy laws permit’ and ‘the penalty area is limited to the narrow field which I have described’.
Judges:
Justice Gorman
Citations:
[1942] Ch 108
Cited by:
Approved – Philip Bernstein (Successors) Ltd v Lydiate Textiles Ltd; orse Sterling Industrial Facilities v Lydiate Textiles Ltd CA 26-Jun-1962
Lord Justice Diplock: ‘. . the ordinary rule which the courts apply is that contracts should be enforced, pacta sunt servanda, unless they can be brought within that limited category of cases in which, for reasons of public policy, the court refuses . .
Approved – Export Credits Guarantee Department v Universal Oil Products HL 1983
A contract provided for the payment of a stated sum by one party to the contract (A) to the other party (B) in the event of the non-performance by A of one of more contractual obligations owed by A not to B himself but to C, who was not a party to . .
Cited – Euro London Appointments Ltd v Claessens International Ltd CA 6-Apr-2006
The court considered whether a clause in an employment agency’s terms and conditions amounted to a penalty and was unenforceable. The contract provided that if the offer was withdrawn by the eventual employer after acceptance but before the . .
Cited – Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd and Another SC 27-Jul-2011
Complex financial instruments insured the indebtedness of Lehman Brothers. On that company’s insolvency a claim was made. It was said that provisions in the documents offended the rule against the anti-deprivation rule. The courts below had upheld . .
Lists of cited by and citing cases may be incomplete.
Contract, Insolvency
Updated: 01 May 2022; Ref: scu.240154
