I-Way Ltd & Anor v World Online Telecom Ltd & Ors

A contractual variation may be established orally where the parties objectively reached agreement, even if the written contract requires variations to be signed. The court assesses disputed negotiations by reference to the objective facts, documents, motives and commercial probabilities. A settlement may compromise potential misrepresentation claims where the complaints formed the basis of negotiations and the relief sought was met. Contractual construction and implication may lead to the same result where the commercial purpose of the agreement requires it. A party that builds a customer base under an agreement and provides information for infrastructure investment may be subject to an obligation not deliberately to divert that customer base, whether arising by construction or implication.

The claimants provided an internet platform for customers of the defendants under an agreement dated 21 April 1999. Disputes arose over projections supplied before contracting, an alleged oral variation of the revenue-sharing terms, the defendants’ later diversion of customers to their own server, and whether the claimants’ withholding of disputed rebate sums amounted to repudiation.

The defendants counterclaimed for the additional rebate share. The court had earlier limited the trial principally to liability. The central issues were whether the 14 May 1999 meeting produced an enforceable variation or settlement, whether the defendants had supplied actionable misrepresentations, and whether the agreement required customer exclusivity.

1. Oral variation and settlement. The parties reached an enforceable oral agreement on 14 May 1999 that the claimants could retain 30 per cent of the rebate rather than 20 per cent. The contemporary correspondence, accounts and commercial probabilities supported that conclusion. The defendants’ alleged arrangement for temporary accrual of the additional 10 per cent was rejected. The agreement also compromised any potential misrepresentation or negligent-misstatement claims arising from the projections, because those complaints formed the basis of the negotiation and the claimants’ requested relief was met.
2. Evidence. In assessing the conflicting recollections of the meeting, the court applied the approach described by Lord Justice Robert Goff in The Ocean Frost [1985] 1 Lloyd’s Rep. 1, considering the objective facts, documents, witnesses’ motives and overall probabilities. The alleged letter of 18 May 1999 was found not to have been sent and to have been prepared later to support the accrual case.
3. Repudiation. The claimants’ refusal to pay the cumulative additional rebate was not a repudiatory breach, because the agreed 70/30 arrangement displaced the original entitlement.
4. Exclusivity. Construing the agreement in its commercial context, and alternatively implying a term to fill the same gap, the defendants were required to direct registered customers to the claimants’ server. The definition and reporting of users, the payment structure and the claimants’ investment commitment made optional access commercially incoherent. Deliberate diversion of the actual and prospective customer base therefore breached the agreement. The claimants’ claim succeeded on this issue and the defendants’ counterclaim failed.