White and Carter (Councils) Ltd v McGregor [1962] AC 413

KEY POINTS

• If a party to a contract, after the other party has repudiated it, acts in a manner that is consistent with the continuation of the contract, they are deemed to have affirmed the contract. 

FACTS

• The plaintiffs supply litter bins to local authorities and attach advertisements to these bins for profit. The defender, who runs a garage in Clydebank, initially entered into an agreement with the plaintiffs in 1954 to display advertisements for his business on these bins.

• Sometime later, the defender's sales manager, without specific authority, extended the contract for another three years. Upon learning of this extension, the defender promptly canceled the contract, but the plaintiffs refused to accept the cancellation. They proceeded to display the advertisements on the bins from November 2, 1957, onwards.

• The defender refused to pay the sums owed under the extended contract, amounting to £196 4s. for the entire three-year period. The plaintiffs brought a legal action in the Sheriff Court seeking payment. 

• The Sheriff-Substitute, on March 15, 1960, dismissed the action, ruling that the sales manager's renewal of the contract was within his apparent authority.

JUDGEMENT

• Complainants could claim the contract price.

COMMENTARY

• This case highlights the importance of clear communication and actions in contract law. Parties to a contract should be cautious when dealing with a repudiated contract, as their subsequent conduct may have legal consequences. This case provides valuable guidance on how to navigate such situations and reinforces the principle of affirmation in contract law.

ORIGINAL ANALYSIS

• A contracted with R’s representative to advertise him for money, including a clause that if R failed to pay money due for 4 weeks, then he had to pay the money that would be owed for the whole duration of the contract. Once the contract was given effect, R asked A to cancel the contract since his representative had misrepresented him and then, when A refused, he failed to pay for 4 weeks. A sued for the whole amount that would be owed under the clause. 

• HL held that the contract was valid and A was entitled to take advantage of the contract. A was not obliged to accept R’s renunciation and sue for damages. 

IN OBITER (Lord Reid)

• Lord Reid said that it may be that where the innocent party has no interest in the contract being carried out as opposed to claiming damages he may be forced to accept damages rather than carrying on with the contract. 

If a party has no interest to enforce a stipulation, he cannot in general enforce it: so it might be said that, if a party has no interest to insist on a particular remedy, he ought not to be allowed to insist on it.

• This is dodgy: it would require a judgment call by courts as to whether an action is in a party’s business interests + it allows a de facto effective repudiation of the contract by a party who is not entitled to do so. 

• However in this case it was clearly in A’s interest to enforce the contract. 

IN OBITER (Lord Hodson)

• Equity does not release a party from an improvident contract and there is no duty on the innocent party to vary it at the behest of the other party.