Gowling WLG and client TRW Lucas Varity Electric Steering Limited (TRW) have won in the Court of Appeal on a $20m breach of contract claim.
The ground breaking case has also clarified the law around a contract being varied orally or by conduct even if it specifically provides that it can only be varied in writing and is signed by all parties.
The case concerned a long-term exclusive supply agreement between TRW and Globe Motors Inc (Globe). TRW purchased Gen 1 motors from Globe, as per the contract. When it began purchasing Gen 2 motors from a third party, Globe argued TRW had breached its agreement. TRW argued this was not the case and the Court of Appeal agreed, overturning the first instance decision in Globe’s favour.
James and the team advised client TRW to contest the first instance decision because the Judge’s decision put an untenable construction upon the agreement in place.
The Court of Appeal upheld TRW’s position that it was not contractually obliged to purchase Gen 2 motors from Globe.
Significantly, in an obiter part of the Judgment, the Court of Appeal has also confirmed that “non-variation” clauses which require that an agreement can only be amended in signed writing do not preclude the later variation of that agreement, either orally or by conduct, provided the evidence of a change of circumstances is sufficiently clear. This includes amending the parties to an agreement.
The clarification has far reaching commercial implications for those seeking to rely upon such clauses.
Partner James Gordon said: “We’re thrilled to have secured the correct outcome for our client in this case. This has been a long-fought battle, but we have achieved the right outcome in the end.
“The Court of Appeal has also made a significant finding in clarifying the law on whether non-variation clauses can always be relied upon. In short, they cannot.”