Jurisdiction(s):
United Kingdom

English High Court: ‘Return’ Means Delivery; Deemed Acceptance for Missed Deadline Not a Penalty; Implied Terms Rejected—European Film Bonds v Lotus Holdings

Published on: 19 May 2020

Published by a LexisNexis Commercial expert

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Article summary

What are the practical implications of this case?

The decision is noteworthy in two respects. First, for those in commerce, it underscores how hard it is, under English law, to depart from the clear, ordinary sense of contractual language. The defendants advanced bold arguments that two terms should be implied so as to avoid the straightforward effect of the express provision at issue—namely that ‘return’ of the materials required their physical handover to the claimants, European Film Bonds AS and other companies (EFB)—but the court rejected those submissions outright. Second, it clarifies, in this context, the outer boundaries of the penalty clause doctrine in English law. The defendants argued that, if the clauses were construed to require them automatically to acknowledge the film as ‘completed and delivered’ merely because a modest time limit had been missed, the result would be an unenforceable penalty. Andrew Hochhauser QC did not accept that depiction of the contractual framework (at para [167]), observing that a timetable was necessary and the consequence of missing a deadline had to be stated expressly within the bargain; the sophisticated parties, acting...

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