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M J Polymers V. Imerys Notes

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M&J POLYMERS V. IMERYS FACTS The defendant company, Imerys Minerals Ltd, was formerly known as English China Clays, which group was acquired by the Imerys Group in April 1999. The claimant company, M & J Polymers Ltd, had been supplying dispersants, which are chemicals used in the breakdown of clay and other materials, to English China Clays since 1991. From 1999, the claimant company continued to supply Imerys, and the most recent contractual arrangements between them, made in July 2003, were to expire in December 2004. Imerys decided to put out a proposed new contract for tender in September 2004. The new supply contract, dated 25 January 2005, was signed on 26 January 2005. It related to the supply by the claimant to the defendant of 4 dispersants. The Relevant Clauses:

5.3. During the term of this Agreement the Buyer will order the following minimum quantities of Products:

5.5 Take or pay: the Buyers collectively will pay for the minimum quantities of Products as indicated in this Article at 5.3 of Jaypol 1183, Jaypol BTC2 and Jaypol 1160 even if they together have not ordered the indicated quantities during the relevant monthly period. The supply contract was purportedly terminated by the defendant in May 2006 by a notice which was treated by the claimant as an unlawful repudiation of the contract, which repudiation the claimant accepted on 19 May 2006. QUESTION Whether the sums due to be paid by the defendant to the claimant in respect of the period prior to what is now accepted to have been the repudiatory breach by the defendant in May 2006 are recoverable in debt, in respect of the price of the minimum quantities of dispersants pursuant to the 'take or pay' clause set out in paragraph 4 above, or by way of damages (the 'penalty issue'). HOLDING Does the law against penalties apply?
This argument, by reference for example to White & Carter (Councils) Ltd v McGregor [1962] AC 413 and its citation in Chitty on Contracts vol. 1 at 26-118 --- 'The law on penalties ... is not relevant where the claimant claims an agreed sum (a debt) which is

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