Ultraframe (UK) Ltd v Tailored Roofing Systems Ltd

Terms are not implied into a commercial contract merely because later conduct appears unfair or commercially damaging. The proposed term must be reasonable and equitable, necessary for business efficacy, obvious, capable of clear expression and consistent with the express contract. The inquiry is conducted against the contract at formation, without hindsight. Where the express bargain leaves a supplier free to compete, set prices and discounts, and contemplates a stronger position after notice ending exclusivity, a broad restriction on lawful solicitation or competition will not be implied. General concepts such as good faith or deliberate injury cannot supply a term where no single necessary and certain solution is apparent.

Tailored Roofing Systems Ltd agreed to purchase roofing systems exclusively from Ultraframe (UK) Ltd, subject to 12 months’ notice, in return for increased discounts. Tailored Roofing alleged that Ultraframe repudiated the contract by campaigning to take its customers and relied on implied terms requiring fair dealing and preventing deliberate injury to its business.

The Manchester Mercantile Court held that the terms were not implied, found Tailored Roofing in repudiatory breach, and found that disputed components had been delivered. Tailored Roofing appealed on the implied-terms and delivery issues. The central questions were whether the proposed restrictions could be implied and whether the first-instance treatment of the delivery evidence required a retrial.

The Court of Appeal dismissed Tailored Roofing’s appeal on both issues. Lord Justice Waller gave the leading judgment; Lord Justice Neuberger and Sir William Aldous agreed.

1. Implied terms. The court adopted the helpful summary in Philips Electronique Grand Public SA and Another v British Sky Broadcasting Ltd, QBCMI/03/0495/B, including the five conditions drawn from BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of Shire of Hastings, (1978) 52 ALJR 20 at p 26. Implication is distinct from interpretation and is an intrusive exercise. A court must not use hindsight to fashion a term merely because a later crisis makes protection appear commercially desirable.
2. The express contract left Ultraframe free to compete with fabricators, sell at prices of its choice, grant discounts and undercut Tailored Roofing, subject to competition law. Clause 2(f) also contemplated Ultraframe obtaining a stronger position after notice ending exclusivity. There was no minimum purchase or supply obligation supporting a Stirling v Maitland implication. Accordingly, no term restricting lawful competition or customer solicitation was necessary under the business-efficacy, officious-bystander or bargain-completion tests. The court did not need to decide whether the proposed wording was sufficiently certain, but noted the serious difficulty created by concepts such as deliberate injury and good faith. A comment in Shell UK Ltd v Lostock Garage Ltd, [1976] 1 WLR 1187, was treated as a throwaway observation and provided little assistance.
3. Delivery. The first-instance reasoning on delivery was unsatisfactory because it failed to address important evidential conflicts and explanations. Nevertheless, the Court of Appeal had the transcript and relevant material. It concluded that there was no delivery at 7 am, but that delivery of all the disputed goods occurred during the morning. A retrial would inevitably reach the same result and would impose disproportionate expense. No retrial was therefore ordered.

The court also described the eight-month delay in delivering judgment as totally unacceptable, but that unappealed issue did not affect the disposition.

• Court of Appeal (Civil Division) — [2004] EWCA Civ 585: dismissed Tailored Roofing’s appeal on the implied-terms and delivery issues.
• Manchester Mercantile Court — His Honour Judge Kershaw QC, judgment dated 1 August 2003: held that the proposed implied terms did not arise, found Tailored Roofing in repudiatory breach, and found that the disputed components had been delivered.