18 March, 2021
Where a contract contains a specific timeframe for completion of a particular action, what is the position if such timeframe is missed? Does it matter if there were understandable reasons for missing the deadline?
A recent Court of Appeal case makes it clear that the courts will be reluctant to step in where the drafting - however unsatisfactory - is clear.
The 2019 case of Joseph (the Claimant) v Deloitte NSE LLP (the Defendant).
By way of summary, the Defendant served a notice of retirement on the Claimant, which the Claimant wanted to challenge. Under the LLP Agreement (the Contract) in order for the Claimant to contest the notice he had to follow the 2 steps outlined. Step 1: the Claimant could ask the LLP board to reconsider. If the board declined to do so, then step 2 was for the Claimant to put his case to the entire partnership in a meeting. This latter step had to be exercised within 7 days of the date of the board meeting at step 1. The board meeting took place on 2 October 2019, and the Claimant was informed by email that he would receive the outcome of the meeting no later than 9 October 2019. However the Claimant did not receive the outcome until 11 October 2019. The Claimant tried to enforce step 2 on 12 October 2019, however he was informed by the Defendant that the 7 day time limit had now lapsed and step 2 could not be enforced.
The question here is, as the Claimant relied upon the Defendant's communication, would this not be an exception to the Contract and could it not possibly override the terms of the Contract?
In the first instance, the Claimant sought 2 remedies: specific performance (for Deloitte to hold a full partners' meeting) and damages for breach of contract. By the time the Court of Appeal heard the case, the first remedy no longer applied, so the court considered the claim for damages, both for breach of an implied term of the contract, and for promissory estoppel.
Firstly, what is an implied term? It is a term that is implied into the contract, usually because not to do so would be unreasonable, or because its inclusion would be so obvious as to go without saying.
The Claimant argued that the Contract contained an implied term that, if there was a delay in communicating the outcome of the board meeting, the time limit for requesting a step 2 meeting would automatically be extended to accommodate such delay.
The court did not agree that there was such an implied term, as an implied term may not contradict any express term. In this case the contract expressly set out the time frame, being 7 days from the date of the meeting. The fact that the outcome was not communicated before the end of that time frame - whilst poor from a drafting point of view - did not detract from the fact that the time frame was expressly stated in the contract.
Promissory estoppel is a legal doctrine which prevents a person from going back on a promise on which the other party has relied.
The Claimant argued that the email contained an implied promise to extend the deadline if the initial decision was not communicated in time.
The criteria for a promissory estoppel to arise includes:
The court again disagreed with the Claimant. Even though the Defendant did not perform its promise, there was no representation that the contractual time limits would be extended.
When there are various stages in a process or decision, make sure the contract is clear on how the stages align with each other. For example in the case, the deadline should have run from the date on which the decision at step 1 was communicated, rather than taken. The clearer you are in the contract the less scope there is for the sort of dispute which arose in this case. Further, if you want an extension of time to exercise a right under the agreement, make sure it is agreed in writing. It is always better to have certainty, than to rely on the courts to imply terms into a contract in your favour.