SC agreed to provide maintenance work for Jet2’s airlines. The agreement had been a three year deal with Jet2 having an option to extend that by a further three years. Jet2 was happy with the favourable rates that it had originally negotiated and exercised the option to extend. This was not economically beneficial to SC, which sought to renegotiate. Meanwhile, there were delays and Jet2 had been late in paying some sums. SC purported to terminate the agreement on the basis that it had given an email contractual notice of non-payment by Jet2. Jet2 argued that SC had no right to do this and treated SC’s actions as a repudiatory breach.
The High Court sided with Jet2. The email had not been a valid notice. The contract had not provided for a specific form of notice that had to be given, but in light of the seriousness of the email (as SC sought to suggest it could bring about termination) it had not been identified in such a serious way. There was nothing to suggest that SC had intended the email to act as such at the time it had been sent. The Court also ruled that SC did not have a common law right to terminate for late payment as time for payments had not been of the essence and there was nothing in the contract to suggest this was the case.
Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP, comments: “This is the classic case of an agreement that started off well turned sour when it became unprofitable for one of the parties and that party not following a process that would justify termination. Where one party purports to terminate the contract and the other party does not agree with that, it inevitably leads to an all or nothing situation where either one party is justified in terminating for the other’s repudiatory breach or the party terminating is itself in repudiatory breach for terminating. Getting the process of termination right is therefore critical to the outcome.”