Zymurgorium Ltd v Hammonds of Knutsford Plc

An oral commercial arrangement does not create an overarching contract unless the parties undertake sufficiently definite, enforceable commitments beyond their individual transactions. Shared expectations and conduct explicable by commercial self-interest do not alone supply those commitments.

However, bespoke arrangements for particular customers may justify inferring individual supply agreements where the parties have made commitments in reliance on exclusivity, price stability, supply and promotion. An indefinite agreement is generally terminable on reasonable notice, assessed when notice is given. The period depends on the relationship's circumstances, including its formality, investment, continuing promotional obligations and the ability to secure an alternative product.

Zymurgorium, a drinks manufacturer, supplied products to Hammonds, its wholesaler. After Zymurgorium began supplying J D Wetherspoon through another wholesaler, Hammonds alleged repudiatory breach of an overarching exclusive wholesale agreement. Alternatively, it relied on five individual agreements concerning particular customers.

HHJ Pearce, sitting as a Judge of the High Court, held that there was no overarching agreement. He found five individual supply agreements, including an agreement concerning Bargain Booze. Zymurgorium's direct supply to J D Wetherspoon was a repudiatory breach of that agreement and a renunciation of the other four. Each agreement was terminable on three months' reasonable notice: [2021] EWHC 2295 (Ch).

Hammonds appealed the rejection of an overarching agreement and the three-month notice period. Zymurgorium cross-appealed the findings concerning Bargain Booze and renunciation of the other agreements.

1. Appeal and cross-appeal dismissed. The trial judge was entitled to find that the November 2015 discussion created no overarching contract. The admitted understanding that Hammonds would act as wholesaler, promote the products, and that Zymurgorium would supply them did not identify enforceable commitments of sufficient substance. There was no obligation to order a specified quantity, or at all, and no definite obligation to accept or fulfil orders. The parties' conduct was adequately explained by the individual contracts formed on orders and by their commercial interests.
2. The alleged later exclusivity agreement could not be a variation because no original overarching contract existed. The alternative case that a contract was later implied by conduct was a new factual case. It was not pleaded or run below, and the court could not be confident that the trial would have proceeded in the same way had it been advanced. The relational-contract ground consequently did not arise.
3. The judge was entitled to infer an individual supply agreement for Bargain Booze. Although the reasoning was compressed and Zymurgorium did not know the precise customer terms, there was evidence of a negotiation as part of a series of bespoke arrangements. The necessary commitments did not depend on knowledge of the exact discount or resale price.
4. Direct supply to J D Wetherspoon was a repudiatory breach of its individual agreement and a renunciation of the other four agreements. It objectively conveyed that Zymurgorium denied any continuing exclusivity or notice obligation. Nothing distinguished J D Wetherspoon in that respect.
5. The three-month notice period was within the reasonable range. The relationship was informal; Hammonds' continuing obligation to promote Zymurgorium's products favoured a short period; and Hammonds developed an alternative product within about three months. The judge made no error of principle or evaluative error.

• Court of Appeal (Civil Division): Hammonds' appeal and Zymurgorium's cross-appeal were dismissed in [2023] EWCA Civ 52.
• High Court, Business and Property Courts in Manchester, Business List (Chancery Division): HHJ Pearce, sitting as a Judge of the High Court, rejected the alleged master wholesale agreement but found five individual supply agreements, repudiation or renunciation, and a three-month notice period: [2021] EWHC 2295 (Ch).