Claim under guarantee of debt

[2016] EWHC 1460 (Comm)
Bailii

Contract, Banking

Updated: 17 January 2022; Ref: scu.565732

The plaintiff company had contracted to make and export to the defendant an aluminium extrusion press. The defendant re-assured the plaintiff that it would be lawful for him to import the plant, but asked that the plant be described falsely on the invoice as ‘parts for rolling mill’. Payment was made by promissory notes. After the first two promissory notes had not been met, the plaintiff ceased production, and sued on the notes and succeeded summarily. The defendant appealed.
Held: The plaintiff was entitled to payment under the first note, because it had performed its obligations under the contract, and there was no failure of consideration. However there was no such completed consideration for the second promissory note, and the defendant should be allowed to defend.
The request to mis-invoice the goods, if illegal, was severable, and did not undermine the contract as a whole. To succeed in their defence of illegality, the defendant had to show that the plaintiff was aware that performance by importing the plant would be illegal, and had agreed to go ahead notwithstanding that illegality. That had not been demonstrated in this case.
An innocent party who is ignorant of the facts or circumstances that would make performance of a contract illegal may be allowed to recover money paid by him under the illegal contract.
Only in exceptional circumstances should a court deprive a claimant of judgment on a claim based on a promissory note.
Lord Denning MR said: ‘The plaintiffs, Fielding and Platt Ltd are manufacturers of machinery. Their business is in Gloucester. In the middle of 1965 they entered into a contract with a Lebanese company called SCIALE Aluminium of Lebanon. They agreed to make and sell to the Lebanese company an aluminium extrusion press for a total sum of andpound;235,000. The plant and equipment was to be delivered free on board at a British port. The time for delivery was 10 1/2 months from 19 June 1965. Payment was to be made by six promissory notes given by the defendant, the managing director of the Lebanese company, Mr Selim Najjar, personally; and he deposited shares, of his own, as security for the due payment of the promissory notes. The promissory notes were payable at intervals during the progress of the work. The first four were payable whilst the plaintiffs were making the machinery in England. Thus the first note was payable on 4 October 1965, for andpound;23,500; the second on 4 December 1965, for andpound;47,000, the third on 4 February 1966, for andpound;47,000; and the fourth on 4 April 1966, for another andpound;47,000. The fifth note was payable on 4 June 1966, for andpound;47,000, which was just about the time when the machinery was to be delivered to the port. The sixth note, the final one, for andpound;23,500, was payable on 4 August 1966.
On 4 October 1965, the first promissory note, for andpound;23,500, fell due. It was not paid. The defendant apologised for not paying it. He asked for a few days’ grace. He said that had been agreed. So be it. He was given a few days-indeed more than a few days. Still he did not pay. When the note was a fortnight overdue he wrote on 18 October 1965: ‘It is my estimate that by the middle of next month all will be arranged and I will be able to proceed with the payments.’ He realised that his non-payment might result in delays on the English side, for he added: ‘Please remember that any delays on your part due to delayed payments will be acceptable.’ When the note was more than three weeks overdue, the plaintiffs decided to suspend work on the contract. On 27 October 1965, they cabled to the Lebanese company:
‘We have today suspended all work on your contract with us and this includes notification to all our material suppliers that they must do no further work on this contract. We have been forced to take this action to comply with the requirements of our authorities. Our current financial commitment to material and equipment suppliers plus design and stock material and labour charges, is extremely heavy. We trust you appreciate that this is your liability. As a result of suspending all work you will appreciate that our delivery date will be considerably extended and the amount of the delay will depend on the time taken for you to resolve your difficulties.’
The defendant never paid the first promissory note or any of the others. He never paid anything. In consequence, the plaintiffs suspended work on the contract, and it remained suspended. No further work was done on it. There were negotiations for a revival of the contract, but they came to nothing.
Stopping there, it is quite plain to me that the defendant was liable to pay the first of the promissory notes. We have repeatedly said in this court that a bill of exchange or a promissory note is to be treated as cash. It is to be honoured unless there is some good reason to the contrary. It is suggested that, on the first note, there was a failure of consideration. That suggestion is quite unfounded. The plaintiffs were getting on with their part of the contract. They were, they say, ordering goods from their suppliers and getting on with the work. At any rate, there is no evidence to the contrary; and, unless they were themselves in default, they were clearly entitled to payment of the first note. The position as to the second note is different. Before it fell due, the defendant said: ‘I cannot pay’; and the plaintiffs replied: ‘We, therefore, suspend work.’ Seeing that the plaintiffs had suspended work, they could not claim payment in full, but at most damages. They could not sue on each note as it fell due-each of the six-when they had suspended all work on the contract. So there is an available defence on the second note. But not on the first note.
This brings me to the second point. In answer to the claim in both notes, the defendant raises a defence of illegality. He says that it was his intention to break the laws of the Lebanon and that the plaintiffs were parties to it. In order to import the extrusion press into the Lebanon, he had to get an import licence from the Lebanon authorities. He had already got a licence to import a two million pound rolling mill, but he had not got a licence to bring in an extrusion press. His intention was to import it without a licence, and he says that the plaintiffs agreed to help him to do so. The plaintiffs agreed, he says, to put in a false invoice. He says: ‘I asked you to invoice the press as part of a rolling mill, and you agreed to it, and, therefore, you cannot recover anything.’ That defence does not commend itself to me. Here is a man who prays in aid his own illegality-he admits he was trying to evade the laws of his own country-and he seeks to implicate the plaintiffs in it.
In order for this to be any kind of defence, he must show first of all that the contract contained a term that the plaintiffs were to give a false invoice; so that it could not lawfully be performed. For if it would be lawfully performed (by giving a correct invoice) the plaintiffs can certainly sue on it. I do not think there was any such term. During the negotiations the Lebanese company did ask the plaintiffs to invoice the press as ‘parts for rolling mill’. But this request did not, as I read the correspondence, become a term of the contract. The contract was concluded on 13 July 1965. And the only subsequent reference was contained later in the confirmation which the plaintiffs sent to the Lebanese company. There was a long detailed description of the goods covering many pages and then, in brackets, were the words (‘to be invoiced as ‘parts for rolling mill”). That was a mere notification by the Lebanese company of the way they wanted an invoice made out. It was not a term of the contract itself. The plaintiffs would therefore quite justifiably refuse to give such invoice, and insist on the contract being lawfully performed.
In the second place, even if it were a term, the defendant would have to show that the plaintiffs were implicated in this illegality, that is that they had knowledge of it and were actively participating in it, see Foster v Driscoll, Lindsay v Attfield, Lindsay v Driscoll ([1929] 1 KB 470 at p 518; [1928] All ER Rep 130 at pp 146, 147) per Sankey LJ. I can see no evidence worthy of the name to suggest that the plaintiffs knew of this illegality. The only evidence is contained in a cable about the import licence. On 16 June 19658 the plaintiffs stated that they were agreeable to the proposed contract ‘subject to evidence of satisfactory importing licence arrangements’. The Lebanese company replied:
‘Concerning our import licence, we have a regular import licence for a total amount of two million sterling, for a complete aluminium plant. This licence is more than what we require for an extrusion press, and since we don’t want to lose our right for the remaining amount, we want the material to be invoiced as ‘parts for rolling mill’. This of course is for local consumption. We discussed these details with your representative here, and will make sure that you do the correct thing when the time comes. Please bear in mind that few items (just any thing) of the total order should be in Beirut the first week of October the latest, because our licence is valid until October 24, 1965, and before that date something should have arrived.’
I do not think that cable was enough to give the plaintiffs knowledge of the illegality. It only shows that the Lebanese company thought it convenient, for local consumption, to have the machines invoiced as parts for a rolling mill, instead of the more accurate description of an aluminium extrusion press.
I cannot help remarking that the defendant seems to have a special fondness for false invoices. At a later stage he suggested that the plaintiffs should give an invoice for only half the cost, instead of the whole; so as to save customs duties. He also suggested that the plaintiffs should write a false letter (which he drafted) to show the Lebanese customs authorities. The plaintiffs very properly did not agree to those suggestions. And when the matter finally came to a head, the plaintiffs firmly said: ‘We must invoice the goods correctly.’ I know there is a suggestion in the affidavit of the defendant that the plaintiffs were implicated, but, in the face of the documents, I see no substance in this suggestion.
There is another point: even if there was a term that these goods should be invoiced falsely in order to deceive the Lebanese authorities, I do not think it would render the whole contract void. That term would be void for illegality. But it can clearly be severed from the rest of the contract. It can be rejected, leaving the rest of the contract good and enforceable. The plaintiffs would be entitled, despite the illegal term, to deliver the goods FOB English port, and send a true and accurate invoice to the Lebanese buyer. The Lebanese buyer could not refuse the goods by saying ‘I stipulated for a false invoice’. He could not rely on his own iniquity so as to refuse payment.
In my opinion, therefore, the defence of illegality is clearly bad. I would allow judgment to be entered on the first note and for the interest thereon; and give leave to defend as to the second.’
Davies LJ said: ‘I agree with the result reached by Lord Denning MR and I do not propose to add anything.’
Widgery LJ said: ‘I also agree. I find each of the main issues in this case one of some difficulty and I am much indebted to counsel for the defendant for his argument; but in the end I have concluded that they are sufficiently determined to justify judgment under RSC, Ord 14 in respect of the amount of the earlier promissory note. So far as the allegation of illegality is concerned, there are I think two independent and sufficient answers to it. First, in order to succeed on this question, the defendant must show that the plaintiffs were aware of the illegal purpose in the falsification of the invoice and that they agreed actively to participate in that purpose so that goods could be illegally imported into the Lebanon which would not otherwise be allowed to enter. The only basis on which it is said that the plaintiffs at any material time had knowledge of that illegal purpose is the telex message of 18 June from the Lebanese company, to which Lord Denning MR has referred. If I may just repeat again the essential words, they were replying to an enquiry from the plaintiffs as to their import licence, and they stated:
‘We have a regular import licence for a total amount of two million sterling, and for a complete aluminium plant. This licence is more than what we require for an extrusion press and since we don’t want to lose our right for the remaining amount, we want the material to be invoiced as’ parts for rolling mill’. This, of course, is for local consumption . . ‘
When that was first read to us, for my part I found it quite incomprehensible, and it is not until one gets further in the correspondence that the real point of it becomes clear. The plaintiffs, of course, had to judge the legality or illegality of what was proposed, without the benefit of the correspondence which developed months later as to the terms of that telex message. I can see no reason whatever to suppose that the plaintiffs should see more in that message than that the invoice was to indicate that the goods were part of a larger matter, which in itself would not involve any illegality that I can see. It is only later that one appreciates that the character of the goods may be of some relevance, and if the plaintiffs did agree to invoice the goods as part of a larger whole, I cannot for my part see that that would involve them in any illegality sufficient to excuse the defendant from liability in this case. Alternatively, as Lord Denning MR has said, I am of the opinion that there was no term in this contract requiring the plaintiffs to invoice the goods as part of a rolling mill. The chief contractual document is a formal and lengthy quotation which the plaintiffs submitted to the defendant setting out details of the machine to be supplied; and on 13 July the Lebanese company accepted that quotation in these words:
‘please consider this letter as an official order based on your quotation of July 5, 1965 and our different telexes to which you have given your agreement.’
At that point there was nothing in the contractual documents to imply an obligation on the plaintiffs to invoice the goods as part of a rolling mill. Counsel for the defendant has referred to the telexes mentioned in that letter, but there was no agreement by the plaintiffs to any telex involving a special form of invoicing. When the plaintiffs received that acceptance of their offer, they sent a formal and detailed confirmation; and it is to be observed that under the terms of their agreement no contract was to be binding on them until that confirmation had been given. In my judgment, that was no more than a confirmation of that which was already agreed, and it would be quite unreal to regard it as a counter-offer containing a new term whereby the goods were to be invoiced as part of a rolling mill.
On the second issue, namely, the failure of consideration, for which the notes were given, my opinion is that these notes were given by the defendant in consideration of the plaintiffs entering into the agreement with the Lebanese company and carrying out that agreement. It is arguable that if counsel for the defendant can sustain his contention that the plaintiffs repudiated the contract in November and that that repudiation was accepted by the Lebanese company, then perhaps it can be shown that liability on bills maturing after the date of the repudiation had itself been determined; but, like Lord Denning MR I can see no possible ground on which it can be said that the consideration for the first bill, which would mature in October 1965, at a time when the plaintiffs were in no way in default, can have been rendered wholly ineffective by virtue of that which followed.
I also would accordingly allow the appeal to the extent that judgment should be entered only in respect of the amount of the first bill and interest thereon.’

Lord Denning MR, Davies, Widgery LJJ
(1969) 113 Sol Jo 160, [1969] 1 WLR 357, [1969] 2 All ER 150
England and Wales
Citing:
Cited – Scott v Gillmore 6-Jul-1810
A bill of exchange, part of the consideration for which is spirituous liquor sold in less quantities than of 20s. value, is totally void, though part of the consideration was money lent -The statute 24 G. 2, c. 40, s. 12, making illegal the sale of . .
Cited – Regazzoni v KC Sethia (1994) Ltd CA 1956
The rule against enforcing foreign political laws did not require it to enforce a contract that violated Indian laws against export to South Africa. The court permitted recognition but not enforcement of foreign revenue laws.
Denning LJ said: . .

Lists of cited by and citing cases may be incomplete.

Contract, Banking

Updated: 23 November 2021; Ref: scu.459793

The customer made out a cheque to pay his builder, but countermanded it. The bank paid the cheque when it was presented by mistake, and now sought repayment from the builder.
Held: The bank succeeded. The court discussed the extent of a banker’s obligations to its customers.
Robert Goff J set out the defences to a claim in restitution: ‘(1) If a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake of fact. (2) His claim may however fail if (a) the payer intends that the payee shall have the money at all events, whether the fact be true or false, or is deemed in law so to intend; or (b) the payment is made for good consideration, in particular if the money is paid to discharge and does discharge a debt owed to the payee (or a principal on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he is authorised to discharge the debt; or (c) the payee has changed his position in good faith or is deemed in law to have done so.’
‘It is a basic obligation owed by a bank to its customers that it will honour on presentation cheques drawn by the customer on the bank, provided that there are sufficient funds in the customer’s account to meet the cheque, or the bank has agreed to provide the customer with overdraft facilities sufficient to meet the cheque. Where the bank honours such a cheque, it acts within its mandate, with the result that the bank is entitled to debit the customer’s account with the amount of the cheque, and further that the bank’s payment is effective to discharge the obligation of the customer to the payee on the cheque, because the bank has paid the cheque with the authority of the customer.
In other circumstances, the bank is under no obligation to honour its customer’s cheques. If however a customer draws a cheque on the bank without funds in his account or agreed overdraft facilities sufficient to meet it, the cheque on presentation constitutes a request to the bank to provide overdraft facilities sufficient to meet the cheque. The bank has an option whether or not to comply with that request. If it declines to do so, it acts entirely within its rights and no legal consequences follow as between the bank and its customer. If however the bank pays the cheque, it accepts the request and the payment has the same legal consequences as if the payment had been made pursuant to previously agreed overdraft facilities; the payment is made within the bank’s mandate, and in particular the bank is entitled to debit the customer’s account, and the bank’s payment discharges the customer’s obligation to the payee on the cheque.
In other cases, however, a bank which pays a cheque drawn or purported to be drawn by its customer pays without mandate. A bank does so if, for example, it overlooks or ignores notice of its customer’s death, or if it pays a cheque bearing the forged signature of its customer as drawer, but, more important for present purposes, a bank will pay without mandate if it overlooks or ignores notice of countermand of the customer who has drawn the cheque. In such cases the bank, if it pays the cheque, pays without mandate from its customer; and unless the customer is able to and does ratify the payment, the bank cannot debit the customer’s account, nor will its payment be effective to discharge the obligation (if any) of the customer on the cheque, because the bank had no authority to discharge such obligation.
It is against the background of these principles, which were not in dispute before me, that I have to consider the position of a bank which pays a cheque under a mistake of fact. In such a case, the crucial question is, in my judgment, whether the payment was with or without mandate. The two typical situations, which exemplify payment with or without mandate, arise first where the bank pays in the mistaken belief that there are sufficient funds or overdraft facilities to meet the cheque, and second where the bank overlooks notice of countermand given by the customer. In each case there is a mistake by the bank which causes the bank to make the payment. But in the first case, the effect of the bank’s payment is to accept the customer’s request for overdraft facilities; the payment is therefore within the bank’s mandate, with the result that not only is the bank entitled to have recourse to its customer, but the customer’s obligation to the payee is discharged. It follows that the payee has given consideration for the payment; with the consequence that, although the payment has been caused by the bank’s mistake, the money is irrecoverable from the payee unless the transaction of payment is itself set aside. Although the bank is unable to recover the money, it has a right of recourse to its customer. In the second case, however, the bank’s payment is without mandate. The bank has no recourse to its customer; and the debt of the customer to the payee on the cheque is not discharged. Prima facie, the bank is entitled to recover the money from the payee, unless the payee has changed his position in good faith, or is deemed in law to have done so.’

Robert Goff J
[1979] 3 All ER 522, [1980] QB 677
England and Wales
Cited by:
Cited – Sandra Estelle Fielding v The Royal Bank of Scotland Plc CA 11-Feb-2004
The husband and wife had signed a bank mandate allowing the bank to act upon the authorisation of either of them. The wife complained that the bank should not be able to recover from her any sums expended by the husband.
Held: The mandate . .
Cited – Lloyds Bank Plc v Independent Insurance Co Ltd CA 26-Nov-1998
The bank had made an electronic transfer of funds for a customer in satisfaction of that customer’s proper debt, but it was done under a mistake of fact as to the cleared status of funds received.
Held: The appeal was turned down. The bank was . .
Cited – Office of Fair Trading v Abbey National Plc and seven Others ComC 24-Apr-2008
The Office sought a declaration that the respondent and other banks were subject to the provisions of the Regulations in their imposition of bank charges to customer accounts, and in particular as to the imposition of penalties or charges for the . .
Cited – Portman Building Society v Hamlyn Taylor Neck (a Firm) CA 22-Apr-1998
The mortgage advance had been against an express requirement that the client use the property as his private residence. After the client defaulted, the appellant lender discovered that the solicitors acting for themselves and the lay client had . .
Cited – Marine Trade Sa v Pioneer Freight Futures Co Ltd Bvi and Another ComC 29-Oct-2009
The parties stood to make substantial losses against each other under contracts for differences after the dramatic fall in the freight market in the financial turmoil of late 2008. . .

Lists of cited by and citing cases may be incomplete.

Banking, Contract

Leading Case

Updated: 11 November 2021; Ref: scu.194776

The Defendant had gambled at the plaintiff’s casino, using cheques drawn on a company to obtain chips, all of which he lost. The cheques not having been honoured, Crockfords sued the Defendant for repayment of the loan made to him on the issue of the chips, and applied for summary judgment. At first instance, Henry J held that the cheques had been accepted in conditional repayment of the loan, so that on dishonour of the cheques, the Defendant remained liable on the loan. He then held that, just as section 16(2) and (4) validated the cheques, so they validated the underlying loan.
Held: A cheque which had been given in exchange for gaming tokens which complied with the Act was to be enforced as would be any other cheque. The use of such tokens was regulated and supported by the law. No new sub-species of contract was created by the Act.
Lloyd LJ said: ‘The legislative purpose of section 16 of the 1968 Act was to discourage gaming on credit. But consistently with that overall objective Parliament had to allow machinery for enabling lawful gaming to take place at licensed clubs. Otherwise those taking part in the gaming would have had to bring their own cash. The solution adopted was a neat one, and is to be found in section 16(1) and (2). Provided the cheque meets the requirements of subsection (2) and subsection (3), the giving of cash or tokens in exchange for the cheque does not contravene subsection (1).
The error in Mr Glick’s argument is to treat section 16(2) as if it only validated the cheque. It does more than that. It validates the whole transaction. Subsection (1) is subject to subsection (2). Subsection (2) provides that the transaction-that is to say the giving of the cash or tokens in exchange for the cheque-shall not contravene section 16(1). Provided the cheque complies with subsections (2) and (3) there is nothing in subsection (1) to prohibit the underlying loan.
What then was the purpose of section 16(4)? The explanation, like so much else in our law, is historical. The old legislation did not make loans for lawful gaming illegal. The Act of 1710 is concerned with securities. It provides that all securities for repaying money knowingly lent for gaming should be ‘utterly void frustrate and of none effect to all intents and purposes whatsoever’. But this was found to work injustice on an innocent holder for value-that is to say a third party to whom the security may have been negotiated without notice. So 125 years later, by the Act of 1835, Parliament amended the law so as to provide that the security should not be void, but should be deemed to have been given for an illegal consideration. Nothing in either Act affects the underlying loan.
The subsequent history is traced in CHT Ltd v Ward [1965] 2 QB 63. It was argued that it would be absurd to invalidate the security but to leave the contract of loan unaffected. That cannot have been Parliament’s intention. This argument was accepted by the Divisional Court in Carlton Hall Club Ltd v Laurence best reported in 98 LJKB 305. It was held that the consideration for the security which was deemed to be illegal as between immediate parties under the Act of 1835 tainted the loan itself.
It was to prevent this line of argument being resurrected that Parliament found it necessary, or at any rate desirable, to enact section 16(4). The source of the taint has now been removed. There is no longer, therefore, any basis for the argument that the underlying loan is illegal or unenforceable. Indeed, to turn the argument the other way, it would surely be absurd to hold that Parliament had, by the Act of 1968, made the cheque enforceable, but made it a criminal offence to enter into the underlying contract of loan.’

Lloyd LJ
Gazette 08-Jan-1992, [1992] 1 WLR 355
Gaming Act 1968 16
England and Wales
Cited by:
Cited – Aspinall’s Club Ltd v Al-Zayat CA 19-Oct-2007
The claimant had sued the defendant for non-payment under a cheque for andpound;2 million. The cheque had been issued to replace earlier cheques given but not met, for sums staked for gambling at the claimant’s casino. The defendant said that the . .
Cited – Grosvenor Casinos Ltd v National Bank of Abu Dhabi ComC 17-Mar-2008
Banker’s reference no guarantee
An Arab businessman lost pounds 18m at the claimant casino, and wrote scrip cheques against his account with the defendant. The claimant obtained judgment, but being unable to enforce that judgment pursued his bank. The club had used a system where . .
Cited – The Ritz Hotel Casino Ltd v Al Daher QBD 15-Aug-2014
The claimant sought to recover andpound;1m on unpaid cheques. The cheques represented half of the sum gambled away by the defendant in one evening. She now alleged that the claimant had not complied with its duties under the 2005 Act to act . .

Lists of cited by and citing cases may be incomplete.

Contract, Banking

Leading Case

Updated: 01 November 2021; Ref: scu.79676

After referring to two Australian cases on penalty clauses in contracts: ‘These statements assist by making it clear that the court should not adopt an approach to provisions as to liquidated damages which could, as indicated earlier, defeat their purpose. Except possibly in the case of situations where one of the parties to the contract is able to dominate the other as to the choice of the terms of a contract, it will normally be insufficient to establish that a provision is objectionably penal to identify situations where the application of the provision could result in a larger sum being recovered by the injured party than his actual loss. Even in such situations so long as the sum payable in the event of non-compliance with the contract is not extravagant, having regard to the range of losses that it could reasonably be anticipated it would have to cover at the time the contract was made, it can still be a genuine pre-estimate of the loss that would be suffered and so a perfectly valid liquidated damage provision.’ but ‘A difficulty can arise where the range of possible loss is broad. Where it should be obvious that, in relation to part of the range, the liquidated damages are totally out of proportion to certain of the losses which may be incurred, the failure to make special provision for those losses may result in the ‘liquidated damages’ not being recoverable.’
The Board considered the nature of penalty clauses. The ‘court should not be astute to descry a ‘penalty clause” and emphasised that it would ‘normally be insufficient . . to identify situations where the application of the provision could result in a larger sum being recovered by the injured party than his actual loss’. However ‘A difficulty can arise where the range of possible loss is broad. Where it should be obvious that, in relation to part of the range, the liquidated damages are totally out of proportion to certain of the losses which may be incurred, the failure to make special provision for those losses may result in the ‘liquidated damages’ not being recoverable. (See the decision of the Court of Appeal on very special facts in Ariston SRL v Charly Records Ltd (1990) The Independent 13 April 1990.) However, the court has to be careful not to set too stringent a standard and bear in mind that what the parties have agreed should normally be upheld. Any other approach will lead to undesirable uncertainty especially in commercial contracts.’
Lord Woolf said: ‘the court has to be careful not to set too stringent a standard and bear in mind that what the parties have agreed should normally be upheld’, not least because ‘[a]ny other approach will lead to undesirable uncertainty especially in commercial contracts’.
Lord Woolf
(1993) 61 BLR 49, [1993] UKPC 3, (1993) 9 Const LJ 202
Bailii
Commonwealth
Citing:
Affirmed – Dunlop Pneumatic Tyre Company Ltd v New Garage and Motor Company Ltd HL 1-Jul-1914
The appellants contracted through an agent to supply tyres. The respondents contracted not to do certain things, and in case of breach concluded: ‘We agree to pay to the Dunlop Pneumatic Tyre Company, Ltd. the sum of 5 l. for each and every tyre, . .
Cited – AMEV-UDC Finance Ltd v Austin 1986
High Court of Australia – Contract – Damages – Penalty – Agreement for hire of chattel – Failure to pay instalments of hire – Termination by owner pursuant to contractual power – Damages – Instalments due but unpaid – Damages for loss of . .
Cited – Esanda Finance Corporation Ltd v Plessnig 1989
(Australia) . .
Cited – Ariston SRL v Charly Records Ltd 13-Apr-1990
Penalty Clauses . .

Cited by:
Cited – Duffen v Fra Bo Spa CA 30-Apr-1998
The plaintiff had been appointed as an exclusive sales agent for the defendant for a minimum period of four years. The defendants terminated it eighteen months early claiming fraudulent misrepresentation.
Held: The clause setting the damages . .
Cited – Cine Bes Filmcilik Ve Yapimcilik and Another v United International Pictures and Others CA 21-Nov-2003
The parties entered into agreements licensing the exclusive distribution of encrypted television channels within Turkey. A clause provided a calculation of damages for a breach amounting to the balance of licence fees due, and other penalties, . .
Cited – Jeancharm Ltd (T/A Beaver International) v Barnet Football Club Ltd CA 16-Jan-2002
The claimant contracted to supply football shirts to the defendant, but claimed that clauses in the contract with regards to late delivery and payment operated as penalties and so were void at common law.
Held: The sums set out were immodest . .
Cited – Tullett Prebon Group Ltd v El-Hajjali QBD 31-Jul-2008
The defendant signed an employment contract to join the claimants as a senior broker. He changed his mind and decided to stay in his existing job. The new employers sued for breach of contract. The defendant said that the claimants had refused to . .
Cited – Cavendish Square Holding Bv v Talal El Makdessi; ParkingEye Ltd v Beavis SC 4-Nov-2015
The court reconsidered the law relating to penalty clauses in contracts. The first appeal, Cavendish Square Holding BV v Talal El Makdessi, raised the issue in relation to two clauses in a substantial commercial contract. The second appeal, . .
Cited – Wright and Another (Liquidators of SHB Realisations Ltd) v The Prudential Assurance Company Ltd ChD 6-Mar-2018
IVA is a special form of contract
Liquidators asked the court whether sums sought by the insolvent company’s landlords were payable and or provable. Under an IVA, the copany had been paying reduced rents, but the arrangement document provided that the full rents would be restored on . .

Lists of cited by and citing cases may be incomplete.
Updated: 14 October 2021; Ref: scu.197033

References: [1863] EngR 154, (1863) 13 CB NS 543, (1863) 143 ER 215, (1863) 1 New Rep 280, (1863) LJCP 121, (1863) 7 LT 712
Links: Commonlii
Coram: Willes J
Three parties including the defendant had drawn bills against each other, which bills came to the plaintiff as bona fide holder for value indorsee. Various sums had been paid on account, and the plaintiff sued the defendant but giving him credit only for the sums he had paid, saying that any excess would be held for the use of the drawers. The defendant offered to pay the sums he owed and the balance outsanding under all the bills, but no more, and paid that sum into court.
Held: Though the bills were not accomodation bills as such, the defendant could not be called on to pay the sum already paid again.
This case is cited by:

• Cited – Hirachand Punamchand -v- Temple CA ([1911] 2 KB 11, [1911] 2 KB 330)
  The defendant, a British army officer in India, had given a promissory note to the plaintiff moneylenders. Unable to pay, he suggested they apply to his father, Sir Richard Temple. In reply, Sir Richard Temple’s solicitors wrote saying they were . .

References: [1810] EngR 393, (1810) 3 Taunt 226, (1810) 128 ER 90 (A)
Links: Commonlii
A bill of exchange, part of the consideration for which is spirituous liquor sold in less quantities than of 20s. value, is totally void, though part of the consideration was money lent -The statute 24 G. 2, c. 40, s. 12, making illegal the sale of spirits in less quantities than to 20s. value, unless paid for, extends to spirits mixed with water.
This case is cited by:

• Cited – Fielding & Platt Ltd -v- Selim Najjar CA ((1969) 113 Sol Jo 160, [1969] 1 WLR 357, [1969] 2 All ER 150)
  The plaintiff company had contracted to make and export to the defendant an aluminium extrusion press. The defendant re-assured the plaintiff that it would be lawful for him to import the plant, but asked that the plant be described falsely on the . .

References: [1844] EngR 772, (1844) 14 Sim 179, (1844) 60 ER 325
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A. executed B bond and mortgage to B. to secure £2,000 lent to him by B., with interest at 5%.
B having sold out a sum of stock to enable her to make the loan, the dividends of which exceeded the interest of the £2000 at £5 per cent., A. afterwards agreed, in consideration of her Ietting the £2000 continue secured at interest as aforesaid, to transfer to her, when requested so to do, the amount of the stock sold out, or, at her option, to pay to her a sum of money sufficient to repurchase it, and, in the meantime, to pay to her the amount of the dividends of it, intstead of the interest of the £2000.
Held, that the agreement was additional to and not substitutional for the bond and mortgage, and was, therefore, usurious.