Sundorne Products (Llanidloes) Limited v Geminor UK Limited

A contract may be formed through a combination of documents and conduct where the essential terms are sufficiently certain, even though the parties contemplated a later, more detailed agreement. Submission of a tender may accept an offer where the offer is conditional upon that submission and acceptance is communicated to the offeror.

A repudiatory breach must go to the root of the contract. Repeated operational defects will not necessarily justify termination where they can be remedied and do not deprive the innocent party of a substantial part of the contractual benefit. Recoverable damages include losses within the defendant’s reasonable contemplation as a serious possibility, including consequential losses caused by limited disposal capacity.

Sundorne Products, trading as Potters Waste Management, and Geminor jointly pursued an Isle of Anglesey County Council waste contract. Their arrangements included a memorandum of understanding, Geminor’s offer letter, and a letter of support. Potters submitted the tender, which was accepted by the Council, but the parties never completed the contemplated consortium agreement.

Geminor later stopped accepting refuse-derived-fuel bales produced by Potters’ subcontractor. Potters alleged that this amounted to repudiatory breach and claimed the additional costs of disposing of the affected waste, including consequential landfill costs arising from constrained energy-from-waste capacity. The issues were whether a binding contract existed, whether Potters’ bale-quality breaches entitled Geminor to terminate, and what loss was recoverable.

1. Contract formation. The court held that the memorandum of understanding, the offer letter and the letter of support, read with the parties’ conduct, created a binding contract. Geminor offered to collect 12,000 tonnes per annum of refuse-derived fuel from Gaskells’ Bootle site at £70 per tonne, subject to currency adjustment, from 1 February 2017 to 21 July 2018. Potters accepted by submitting the tender within the stated period and communicating that submission to Geminor. The later consortium agreement was not a condition precedent to contractual liability. The memorandum remained effective because none of its termination events occurred.
2. Implied terms and breach. The bales had to have sufficient structural integrity, be adequately wrapped, avoid odour and leakage, and present no material environmental, regulatory or litigation risk. The first two rejected loads did not establish repudiatory breach, particularly as collections resumed. The final nine loads could and should have been shipped, subject to isolating or repairing a small number of defective bales. In any event, even assuming rejection was justified, the defects were remediable and did not deprive Geminor of a substantial part of the contractual benefit. Geminor therefore lacked a right to terminate and repudiated the contract by refusing further collections.
3. Damages. Potters was entitled to be placed in the position it would have occupied had the contract been performed. The additional costs of disposing of Anglesey waste and diverting Gaskells’ own waste to landfill were within Geminor’s reasonable contemplation as a serious possibility, given Geminor’s knowledge of limited energy-from-waste capacity. The profit-sharing arrangement with Gaskells did not reduce Geminor’s liability for Potters’ loss.
4. The court awarded £801,041.20. It recorded an alternative direct-loss award of £357,831.60 and adjourned consequential matters.

First-instance judgment. The court granted extensions of time for any application for permission to appeal and for appealing, subject to further order.