J Toomey Motors Ltd & Anor v Chevrolet UK Limited

Detailed contractual provisions generally cannot be supplemented by broad recitals or previous commercial practice where the proposed terms concern the same subject matter. A term is implied only where the established requirements of necessity, obviousness, clarity and consistency with the express contract are satisfied. Commercial coherence is assessed objectively and does not require protection from every adverse financial consequence. A detailed franchise agreement may, however, imply a limited obligation to supply available standard vehicles reasonably promptly where the agreement’s ordering provisions and commercial context require it. Such a term will not assist a claim unless its breach causes recoverable loss.

The claimants operated Chevrolet dealerships under written franchise agreements with the defendant. After General Motors decided to withdraw the Chevrolet brand from Europe, Chevrolet gave the dealers notice terminating their franchises and substantially reduced its UK stock, incentives, dealer network and advertising support.

The claimants alleged that the agreements contained express or implied obligations to maintain financial incentives, UK vehicle stock, a dealer network and national advertising. They alleged that Chevrolet’s conduct breached those obligations repudiatorily and claimed losses for new and used vehicle sales, servicing and bodywork.

The central issues were whether the alleged obligations formed part of the agreements, whether any obligation concerning prompt vehicle supply was breached, and whether any breach caused loss.

1. Claim dismissed. The alleged express and implied obligations concerning financial incentives, maintenance of a UK stockholding, continuation of a national dealer network and national advertising were not established.
2. The Purpose Clause was an explanatory preamble and did not contain operative contractual promises. It could not be used to derive specific obligations from general statements about cooperation, mutual dependence or business success, particularly where the detailed agreement dealt expressly with pricing, ordering, marketing and dealer responsibilities. Clause 13.1 similarly described the existing dealer network and did not impose an obligation to maintain it.
3. The implication of terms was governed by the principles restated in M & S v BNP Paribas [2016] AC 742. The proposed terms were not necessary to give the agreement commercial or practical coherence, were not obvious, lacked sufficient precision and, in several respects, conflicted with the express provisions. The allocation of the risk that incentives might not be offered lay with the dealer.
4. There was no separate legal head of implication based on course of dealing. Previous conduct could inform contractual context, but it did not convert discretionary incentives previously provided into contractual obligations under a detailed written agreement.
5. A narrower term was implied requiring Chevrolet to supply available, standard and popular vehicles reasonably promptly after a dealer order. The ordering provisions indicated that Chevrolet could not refuse arbitrarily to supply available vehicles. The term did not require Chevrolet to maintain a particular compound or a specified quantity of stock.
6. That term caused no recoverable loss. The claimants placed almost no relevant orders after the major stock sale, and the principal loss alleged resulted from the absence of financial incentives. The claim therefore failed. The judge also considered that, had the wider obligations been established, the wholesale failure to comply with them would likely have been repudiatory, but that observation did not affect the result.