Force India Formula One Team Ltd v Etihad Airways PJSC & Anor

A contractual termination right may differ from the common-law right to accept repudiation. Where a contractual termination clause applies only to an unremedied breach, the innocent party must comply with its notice requirements, and a remediable breach cannot ordinarily justify immediate termination.

A party with knowledge of a breach may affirm the contract by conduct which is consistent only with affirmation. Damages for wrongful repudiation may include contractual payments lost, subject to credit for substitute benefits caused by the breach. Subsequent events may be used to assess damages where the relevant contingency has materialised.

Force India claimed sums due under a sponsorship agreement with Etihad Airways and Aldar Properties, together with damages for breach. The defendants purported to terminate the agreement after changes to the team’s ownership, name, branding and livery, alleging material and irremediable breaches.

The principal issues were whether the defendants’ notice validly terminated the agreement or accepted a repudiatory breach, whether alleged breaches had been waived or affirmed, and the proper assessment of damages and contractual bonuses.

1. Termination and repudiation. The contractual right to terminate under clause 21.3.1(a) was not necessarily co-extensive with the common-law right to accept repudiation. The alleged breaches had to be material and, where remediable, had to remain unremedied after the contractually required notice.
2. The alleged breaches concerning winter-testing livery and the Kingfisher logo were either not material or were remediable. The alleged change-of-name breach was assumed, without deciding, to be material, but it was plainly remediable because the former name could have been restored. The allegations concerning the ownership structure and Kingfisher Airlines were unsupported or inconsistent with other contractual rights.
3. Waiver and affirmation. Applying the principles stated in Tele2 International Card Company SA v Post Office Limited [2009] EWCA Civ 9 and The Kanchenjunga [1990] 1 Lloyd’s Rep 391, the defendants’ informed failure to complain, coupled with their continued conduct and expressions of satisfaction, was consistent only with affirmation. They had elected not to terminate and had waived, or acquiesced in, the alleged breaches.
4. The defendants’ purported termination therefore amounted to a wrongful repudiation, which the claimant accepted.
5. Damages. Substitute sponsorship income from Kingfisher Airlines and Whyte & Mackay was sufficiently connected with the breach and had to be credited. Other sponsorship income was collateral and did not require credit. The claimant recovered US$2,841,025 plus US$42,216.44 interest.
6. The team was penultimate in the 2007 Constructors’ Championship despite McLaren being disqualified and unranked. The claimant recovered US$300,000 from Etihad and US$200,000 from Aldar. Applying the hindsight approach in Golden Strait v Nippon Yusen [2007] 2 AC 353, the claimant recovered US$1.3 million for points bonuses based on points actually scored in 2008 and 2009. The counterclaim was dismissed.

First-instance decision. No earlier judgment or appeal is stated in the judgment.