Legal Updates

Commercial Law – Interpretation of Termination Clause – Licence Agreement

The case of Bespoke Couture Ltd v Artpower Ltd and Another [2006] involved the trading company of B, a well-known fashion designer for men. The trading company was the claimant. On 8 October 2002, the defendants entered into an agreement with the claimant for the production, sales and licensing of menswear.

The case brought by the claimant primarily sought the court's determination on the construction of the termination provisions in the agreement. The courts looked at clause 9.3 of the agreement, which provided:

'…This agreement may be terminated (a) by either licensor [Bespoke] or Artpower with immediate effect if the other commits a material breach of any term of this agreement which in the case of a breach capable of remedy shall not have been remedied within thirty (30) days working days of the receipt by the other of a written notice identifying the breach and requiring its remedy. Upon remedy, the party in breach shall provide proof of remedy within this same thirty (30) working days'.

The claimant argued that a letter sent by the claimant's solicitors dated 28 October 2004, complied with and had triggered the notice provisions under the above clause. They claimed that the agreement had automatically terminated on 10 December 2004.

In coming to a conclusion on the issue of construction, the court had to consider the circumstances of a hearing in which an order was made by a Chancery judge on 9 December 2004. The judge held that on the true construction of clause 9.3, the agreement had automatically ended on 10 December 2004.

The defendants appealed against this decision.

The appeal was allowed. On appeal, it was decided that on the true construction of clause 9.3 the party not in breach had to:

§   Take a positive step to bring the agreement to an end; and

§   Communicate that it was terminating the agreement to the other party.

It was held that no step taken by B before 10 December 2004 had amounted to a suitable notice of termination.

Please contact us for more information on assessing damages due under termination of a contract at enquiries@rtcoopers.com

Visit http://www.rtcoopers.com/practice_corporatecommercial.php

© RT COOPERS, 2007. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.

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