Topalsson GmbH v Rolls-Royce Motor Cars Limited

A contractual project plan may become binding where the agreement contemplates that delivery dates will be fixed or refined during an initial phase and the parties subsequently agree a detailed plan. Where the contract states that time is of the essence, failure to meet the specified dates is a breach of condition, regardless of the extent of delay.

An express termination clause permitting termination for failure to meet delivery dates does not ordinarily apply to trivial breaches. Its application depends on the circumstances, although delay in performing a condition may justify termination without regard to the magnitude of the delay. Contractual caps and set-off provisions must be applied according to their wording.

Topalsson supplied digital twin and configurator software to Rolls-Royce Motor Cars Limited under a services agreement. Delays arose during development, and the parties adopted a detailed December implementation plan followed by a March plan identifying revised dates for Technical Go-Live of IVT, Closed Room and CRIS.

Rolls-Royce terminated the agreement after the revised dates were missed. Topalsson alleged unlawful termination, claimed damages and sought intellectual-property relief. Rolls-Royce counterclaimed for breach damages and misrepresentation.

The principal issues were whether the implementation plans were contractually binding, whether time was of the essence, whether Technical Go-Live had been achieved, whether termination was valid, and how the parties’ contractual accounting and liability cap applied.

1. Contractual plans and time. The high-level plan in the tender documents was indicative and did not impose fixed deadlines. The December Plan, however, was the refined implementation plan produced under DP1, agreed by the parties, incorporated into the Business Proposal and used as the operative timetable. It therefore imposed contractual delivery obligations. Under clauses 5.3.7 and 5.8 of Section 7, time was of the essence for its milestone dates. The March Plan constituted a binding relaxation and extension of the December Plan. Its dates were confirmed as specific dates and achievement of them was made a condition of the continuing contractual relationship.
2. Technical Go-Live. On the contractual documents, Technical Go-Live required delivery and installation of the relevant release, successful completion of SIT and UAT under the agreed Test Plan, and operation in a technically live production environment. IVT achieved Technical Go-Live on 20 March 2020 rather than 9 March. Closed Room did not complete SIT or UAT and contained critical defects. CRIS had not entered SIT or UAT and would not have achieved Technical Go-Live by 23 April.
3. Responsibility for delay. Although the project had started late, Topalsson remained responsible for meeting the agreed revised dates. Its complaints about access, requirements, RPC, and the waterfall methodology did not establish that Rolls-Royce had impeded performance. Topalsson remained responsible for its subcontractor and had not shown that the hybrid agile and waterfall methodology prevented compliance.
4. Termination. The first termination notice wrongly relied on the December Plan after the March Plan had superseded it. Topalsson rejected that notice and affirmed the agreement. The second notice validly relied on the missed March Plan dates. Clause 13.11.3 did not permit termination for every trivial breach, but the failures were material and, because time was of the essence, constituted breaches of condition entitling Rolls-Royce to terminate under the agreement and at common law.
5. Misrepresentation and damages. The alleged Audi representations were substantially true or were not proved, and inducement was not established. The agreement required calculation of sums due to each party, set-off to determine the net balance, and application thereafter of the aggregate €5 million liability cap. Rolls-Royce was entitled to €5 million plus contractual interest. Topalsson was entitled to proportionate payment for work completed, but the net balance remained due to Rolls-Royce.
6. Intellectual property. Payment in accordance with the contractual accounting exercise transferred title to the relevant Deliverables. Rolls-Royce undertook not to use or copy Supplier Software and to destroy copies after preservation and inspection. Rights in Bespoke Software and Rolls-Royce data remained with Rolls-Royce, with appropriate declaratory and delivery-up relief.