Baird Textile Holdings Limited v Marks & Spencer plc

A contract will be implied from conduct only where implication is necessary to give business reality to the parties’ dealings. The conduct must be inconsistent with the absence of the alleged contract. The essential obligations must also be objectively certain, and the parties must have intended to create legal relations.

A requirement of reasonableness cannot supply certainty unless objective criteria enable the court to apply it without making the parties’ bargain. Promissory or conventional estoppel cannot create a free-standing, non-proprietary obligation which is insufficiently certain and was not intended to affect legal relations. Limiting the remedy to reliance loss does not avoid those requirements. On summary judgment, possible future development of settled law is not, without more, a compelling reason for trial.

Baird Textile Holdings Limited v Marks & Spencer plc arose from the abrupt termination of a 30-year garment-supply relationship. Baird alleged an implied long-term umbrella contract under which the relationship was terminable only on reasonable notice and Marks & Spencer had to purchase garments in reasonable quantities at reasonable prices. Alternatively, Baird relied on estoppel and sought compensation measured by the detriment caused by termination without three years’ notice.

Marks & Spencer applied for summary judgment. Morison J dismissed the contractual claim but directed that the estoppel claim proceed to trial. Baird appealed against the contractual ruling, and Marks & Spencer cross-appealed against the continuation of the estoppel claim. The central questions were whether either claim had a real prospect of success and whether any other compelling reason required a trial.

1. Disposition. The Court of Appeal unanimously dismissed Baird’s appeal and allowed Marks & Spencer’s cross-appeal. The challenged parts of the claim were struck out, and permission to appeal to the House of Lords was refused.

2. Implied contract. The Vice-Chancellor held, with Judge and Mance LJJ agreeing, that a contract may be inferred from conduct only where implication is necessary to give business reality to the transaction. The conduct must be referable to the alleged contract or inconsistent with there being no contract. This approach was supported by The Aramis [1989] 1 Ll.L.R. 213 and the related authorities.

   The alleged obligation to buy and supply garments at reasonable quantities and prices lacked objective criteria. Determining its content would require the court to review the parties’ changing needs, capacities, investments and expectations and then write a reasonable bargain for them. The implication of reasonableness approved in Hillas v Arcos (1932) 147 LT 503 applies where an objective standard already exists; it cannot create an agreement which the parties did not make. The uncertainty also confirmed the absence of an objective intention to create a legally enforceable long-term relationship.

3. Estoppel. The estoppel claim could not succeed merely by being detached from the failed contractual claim. Under Combe v Combe [1951] 2 KB 215 and Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84, promissory or conventional estoppel cannot stand alone to create the asserted cause of action. The representation or convention must also possess sufficient certainty and be intended objectively to affect an actual or apparent legal relationship.

   Proprietary estoppel may permit flexible relief despite contractual uncertainty, but the binding limitation stated in Western Fish Products Ltd v Penwith District Council [1981] 2 AER 204 confined that doctrine to expectations of rights over another’s land or, probably, other property. Baird asserted no such expectation. Relabelling the remedy as compensation for reliance loss could not bypass the requirements of certainty, legal intention and an existing legal relationship.

4. Summary judgment. The court had to apply English law as it stood. The possibility that the House of Lords might later extend estoppel did not give the claims a real prospect of success or amount, by itself, to a compelling reason for trial. Even assuming that Baird could prove the material pleaded facts, those facts could not yield the claimed relief under existing law.

1. Court of Appeal (Civil Division): In Baird Textile Holdings Limited v Marks & Spencer plc [2001] EWCA Civ 274 , Baird’s appeal was dismissed and Marks & Spencer’s cross-appeal was allowed. Paragraphs 1 and 2 of the claim form were struck out, and permission to appeal to the House of Lords was refused.

2. High Court: Morison J granted summary judgment dismissing the contractual claim but directed that the estoppel claim proceed to trial. Both parties appealed, with his permission, from the part of the order adverse to them.