Hudson Bay Apparel Brands Llc v Umbro International Ltd

An exclusive sportswear licence is construed objectively by asking whether goods are specifically intended for use on the field of play. The relevant intention is that of a hypothetical supplier or buyer, not the subjective intention of an ultimate purchaser. Design, functionality and marketing context may be considered, and the absence of pockets may be decisive. A representative’s approval of goods outside the licence binds the licensor only where actual authority or an objectively established holding-out exists. A collateral agreement or estoppel requires the relevant common understanding and reasonable reliance. Waiver ordinarily requires knowledge of essential facts and cannot create a substantive right to future performance. The appeal was dismissed.

Hudson Bay appealed against a decision of the Chancery Division in proceedings concerning an exclusive United States licence for Umbro-branded off-field apparel. The judge found that Umbro UK had breached the agreement to a limited extent, upheld Hudson Bay’s first claim in broad terms, and gave judgment for Umbro UK on its counterclaim concerning the marketing of pocketless shirts, shorts and tracksuits as on-field wear. The decision is reported at [2009] EWHC 2861 (Ch). The appeal challenged the classification of the garments, the effect of Miss Jackson’s approval, and the arguments based on authority, variation, retrospectivity, estoppel and waiver. It also concerned the refusal of an order for products from a later collection.

Disposition. The Court of Appeal dismissed the appeal. Lord Neuberger MR gave the judgment, with Arden LJ and Tomlinson LJ agreeing.

1. Construction and classification. The contractual question was whether the goods were specifically intended for use on the field of play for soccer. The words had to be read as a whole. The field of play meant the actual playing field, including informal and practice games, and the intention was to be determined objectively by reference to a hypothetical supplier or buyer rather than the subjective intention of an end-user. The judge below had applied the correct approach.
2. Application to the garments. The pocketless shirts and shorts were properly classified as on-field wear. Their design, lack of pockets, standard logos and marketing supported that inference, with the absence of pockets ultimately decisive. The matching tracksuits were marketed through the same collection and channel and were likewise on-field wear. The court also upheld the classification of the tracksuits sold by Dick’s.
3. Authority. Miss Jackson lacked actual authority to modify the formal licence or grant a further licence for goods outside its scope. Ostensible authority required Umbro UK itself, rather than Miss Jackson, unambiguously to hold her out as having that authority. The principle in Armagas Ltd v Mundogas Ltd (The Ocean Frost) [1986] AC 717 was applied. First Energy (UK) Ltd v Hungarian International Bank Ltd [1993] 2 Lloyd's LR 194 was distinguishable because it involved a representation that the principal itself had approved the transaction.
4. Variation and reliance. The proposed variation could not bind Umbro UK because Miss Jackson lacked authority. The court assumed that a pre-contract common understanding, supported by reasonable detrimental reliance, might found a collateral agreement or estoppel and influence interpretation, as discussed by reference to City of Westminster Properties (1934) Ltd v Mudd [1959] Ch 129 and Amalgamated Investment and Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84. That possibility did not assist Hudson Bay because Umbro UK was unaware of the relevant facts when it signed the agreement.
5. Waiver and the second claim. Waiver ordinarily required knowledge of the essential facts. Umbro UK lacked that knowledge and objected promptly once it became aware of the marketing. The principle in Peyman v Lanjani [1985] Ch 457 was applied. In any event, waiver could not create a substantive right to future marketing, consistent with Enrico Furst & Co v W E Fischer Ltd [1960] 2 Lloyd's Rep 340. Assuming an implied term restricting refusal of later orders, Umbro UK had reasonable commercial grounds for refusing the order while the contractual dispute remained unresolved.

• Court of Appeal (Civil Division) The appeal was dismissed. The court upheld the classification of the disputed garments as on-field wear, rejected the authority, variation, retrospectivity and waiver arguments, and upheld the conclusion on the later order.
• High Court, Chancery Division (Intellectual Property) Mr Mark Herbert QC, sitting as a Deputy Judge, gave judgment for Umbro UK on its counterclaim and granted only limited relief on Hudson Bay’s second claim. The decision is reported at [2009] EWHC 2861 (Ch).