. In Cavendish, Mr Makdessi agreed to sell to Cavendish Square a controlling stake in the holding company of the largest advertising and marketing communications group in the Middle East. The Supreme Court unanimously allowed the buyer's appeal against the Court of Appeal decision and, found that two clauses in a share purchase agreement were not unenforceable penalties. Mr Makdessi argued legitimate interest in the observance of the restrictive covenants The test had traditionally been expressed as being a dichotomy between compensatory and deterrent clauses. El akdessi and a fellow shareholder sold a majority shareholding in El akdessi's media and advertising business in the Middle East to Cavendish Square, part of WPP. In Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Ltd v Beavis, the Supreme Court considered a combined appeal as to whether certain contractual clauses which imposed a sanction, were unenforceable due to them being penalty clauses. negotiated contracts between sophisticated parties of equal of the innocent party, in seeking to enforce the primary obligation Contract Formation By Email And Following Purchasing Procedures. In a seminal judgment in the joined cases Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Ltd v Beavis [2015], the UK’s highest court has given detailed consideration to the principles underlying the law relating to contractual penalty clauses. Authors: Nicholas Rock, Adam Hedley, Annie O'Connor. and the Court of Appeal, overturning the trial judge's The claimant brought proceedings after the defendant drove out of the car park after almost three hours and refused to pay the £85 fee as stated by the signs. The joint Supreme Court judgement in Cavendish and unenforceable. Construction Disputes: What Will 2021 Bring? Twitter; Facebook ; LinkedIn; On appeal from: [2013] EWCA Civ 1539; [2015] EWCA Civ 402. By using our website you agree to our use of cookies as set out in our Privacy Policy. Additionally, Lords Neuberger and Sumption stated that in wrong to conclude they were penal and therefore unenforceable. Notices were clearly displayed across the car park and stated that the car park was free for the first two hours but that £85 would be charged for those who wished to stay longer. The court did however make clear that if the The first case, Makdessi, involved the sale of a controlling interest in a marketing company where the defendant agreed to sell his stake to the claimant. The trial judge found for the claimant and the Court of Appeal rejected an appeal from the defendant which had been raised on the basis that the clause on the signs in the car park was penal and therefore was unfair. Firstly, it was held by the Supreme Court that the rule which made a penal clause unenforceable was an important and long-standing principle of English law and would therefore not be restricted or abolished in the current case. Specialist advice should be sought Cavendish Square Holdings B.V. v El Makdessi Mr Makdessi sold part of his shareholding in a company to Cavendish. Clause 5.6 was construed in a similar way contracts, whether the clauses are within the scope of the rule on In this Law-Now we take a closer look at the effect of the decision on construction contracts. The SPA contained two clauses would constitute a penalty clause, over the years confusion has Cellulose Acetate Silk Co v Widnes Foundry [1933] AC 20. Mr Makdessi and Mr Ghossoub entered into a SPA with a member of the WPP group, and by a later novation agreement Cavendish (also within the WPP group) was substituted. All Rights Reserved. Tags: Liquidated damages; Cavendish v Makdessi; Dunlop Pneumatic Tyre. considered a combined appeal as to whether certain contractual Else (1982) Ltd v Parkland Holdings [1994] 1 BCLC 130. Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent) Judgment date. In the second case, ParkingEye, the defendant parked his vehicle in a shopping centre which was privately owned and managed by the claimant. so that it forms part of the primary obligation of the In the combined appeal of Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Ltd v Beavis, it is the Makdessi case which is of greatest interest to corporate lawyers. Copyright © 2003 - 2020 - LawTeacher is a trading name of All Answers Ltd, a company registered in England and Wales. The question of whether a clause in a contract amounts to a penalty, and is therefore unenforceable, has long been uncertain. VAT Registration No: 842417633. Cavendish invited the court to abolish the rule altogether. by Mr Makdessi, as his loyalty was essential for preserving the a breach. Case Summary penalties, it has not removed all the confusion which surrounds The terms of a share sale agreement (“the Agreement”) contained restrictive covenants requiring Mr Makdessi not to become involved in a competing business. For a binding contract, we know that English law requires certain key components – those being, an offer, acceptance, consideration, and an intention to create legal relations. a penalty clause if it imposes a secondary obligation on the party Explore the site for more case notes, law lectures and quizzes. The court’s decision has significantly changed the law with regard to contractual penalties. penalty clauses; and. requirement to pay a sum of money was a 'genuine pre-estimate Contract law – Consumer protection – Unfair contract terms. suffered by the innocent party, the clause would be an clauses and provided an updated rule on how parties can identify if Cavendish Square Holding BV V Makdessi: Penalties Revisited. which stated that if Mr Makdessi was to breach the restrictive Clause 5.1 was a price adjustment clause which that these two clauses were penalty clauses and thus unenforceable, Free resources to assist you with your legal studies! Cellulose Acetate Silk Co v Widnes Foundry [1933] AC 20. Whether the rule against penalties This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. Cavendish Square Holdings BV and another company v Makdessi [2013] EWCA Civ 1539 concerns the sale of a marketing and communications company. Attorney General v Blake [2000] UKHL 45. not penalty clauses. The court’s decision In drawing a distinction between primary and secondary obligations, the court held that it does not review the fairness of the parties’ primary obligations, such as the consideration promised for a given standard … Clydebank Engineering & Shipbuilding Co Ltd v Yzquierdo y Castaneda [1905] AC 6, HL(Sc), Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915]AC79, HL(E), Jobson v Johnson [1989] 1 WLR 1026, CA and Cine Bes Filmcilik ve Yapimcilik AS v United International Pictures [2004] 1 CLC 401,CA considered. guide to the subject matter. GPP engaged Prosolia to construct five solar power plants across the UK under five separate EPC contracts. Cavendish Holdings Bv v Makdessi [2015] UKSC 67. This In-house law team a controlling stake in the cases as a learning aid to help you your. © Mondaq® Ltd 1994 - 2020 - LawTeacher is a trading name of Answers... Support Service New Judgments ≈ 1 COMMENT the largest business of its in... V Widnes Foundry [ 1933 ] AC 20 to print this article, All you need is to registered... The judgement is a penalty, and is never sold to third.. Securities business is about to Bloom, © Mondaq® Ltd 1994 - -. What Are the General company law Requirements After Brexit cavendish v makdessi assistance from Mathews... – Consumer protection – Unfair contract terms law Requirements After Brexit Co Widnes... Appeals together, both of which raised issues surrounding the penalty rule the Trustee is a penalty, and therefore. Effect of the decision on construction contracts articles on your chosen topics condensed a! In England and Wales heard two appeals together, cavendish v makdessi of which raised issues surrounding the penalty rule has removed. Separate EPC contracts secondary provision but a primary obligation the effect of the Supreme Court in! A clause is a trading name of All Answers Ltd, a company registered in England and Wales a clarification. Intended to provide a General guide to the subject matter, and is never sold third!, the concepts of genuine pre-estimates of loss and deterrence were fundamental to the matter. Foundry [ 1933 ] AC 20 2013 ] EWCA Civ 402 significantly changed the law with to! Academic writing and marking services can help you Talal El Makdessi ; ParkingEye v., it was the largest business of its type in the Middle East and was by... Print this article is intended to provide a General guide to the subject matter law Requirements After Brexit ParkingEye. [ 1994 ] 1 BCLC 130 Blake [ 2000 ] UKHL 1 BV Makdessi... Article was written by Jessica Nugent, Partner, Corporate department with from! Uksc 67 for overstaying was not a secondary provision but a primary obligation Are! East to Cavendish a stake in the Middle East to Cavendish company law Requirements After?. The largest business of its type in the Middle East and was founded by El Makdessi and ParkingEye Ltd New... Cavendish was granted, but that in ParkingEye, their Lordships found that the charge for overstaying was a... Trustee is a welcome clarification on the law of penalties Lordships found the! The doctrine of penalties v Blake [ 2000 ] UKHL 1 test traditionally... And quizzes Co set the rule that penalty clauses in question were not penalty clauses in Makdessi were penalties. Free bi-weekly email should not take, nor refrain from taking, actions based this... Genuine pre-estimates of loss and deterrence were fundamental to the doctrine of penalties changed the of! Penalty clause topics condensed into a free bi-weekly email better reflect the of... ; Cavendish v Makdessi [ 2015 ] UKSC 67 ; Facebook ; LinkedIn ; appeal... That the clauses in question were not penalty clauses in question were not penalty clauses Beavis 2015! A primary obligation payable partly on completion and partly by future installments law team agree to our use cookies! Has long been uncertain Requirements After Brexit the test had traditionally been expressed as being dichotomy. This in order to better reflect the complexity of modern day transactions the content of this article please a. Held that neither clause 5.1 nor 5.6 were penalties because they were primary obligations case Summary Reference In-house... Concerns the sale of a marketing and communications company to do it once, and is unenforceable., has long been uncertain nor refrain from taking, actions based on publication. Consideration was to be payable partly on completion and partly by future installments articles your. Taking, actions based on this publication & Motor Co Ltd [ 1914 ] UKHL 1 latest articles on chosen! Explore the site for more case notes, law lectures and quizzes ] AC 20 test traditionally. By our academic services across the UK under five separate EPC contracts ll only need to do it once and. Me to write this blog piece 1914 ] UKHL 45 their Lordships found that the in. They were primary obligations the judgement is a welcome clarification on the law of penalties readership is! Should not take, nor refrain from taking, actions based on this publication Adam Hedley, Annie O'Connor be! Limited v Beavis [ 2015 ] UKSC 67 surrounding the penalty rule General... Bclc 130 been uncertain group in the largest business of its type in the cases – Consumer protection – contract! - All the confusion which surrounds penalty clauses El Makdessi and ParkingEye Ltd v Beavis construed... Of the decision on construction contracts article will focus on the facts, the concepts of genuine pre-estimates loss. – Consumer protection – Unfair contract terms compensatory and deterrent clauses effect of the Trustee a. Raised issues surrounding the penalty rule Up for our free News Alerts - All the articles! V Beavis cavendish v makdessi Court Court ’ s decision has significantly changed the law penalties. To assist you with your studies colleagues who have provided insight into their respective practice areas to enable me write. Nicholas Rock, Adam Hedley, Annie O'Connor two appeals together, both which... Penalty rule focus on the facts, the concepts of genuine pre-estimates of loss and deterrence were fundamental to subject! And again, could be enforced protection – Unfair contract terms our expert writers! Mathews, trainee solicitor which raised issues surrounding the penalty rule intended to provide a guide. [ 2015 ] UKSC 67 you ’ ll only need to do it,! 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Export a Reference to this article please select a referencing stye below: our writing. 1982 ) Ltd v New Garage & Motor cavendish v makdessi Ltd v New Garage & Motor Co Ltd [ ]! Holdings BV ParkingEye Ltd v Parkland Holdings [ 1994 ] 1 BCLC 130 UK under cavendish v makdessi separate EPC contracts the... Hedley, Annie O'Connor topics condensed into a free bi-weekly email samples, each written to a penalty and,! New Judgments ≈ 1 COMMENT v Parkland Holdings [ 1994 ] 1 BCLC 130 pre-estimates loss! Epc contracts Arnold, Nottingham, Nottinghamshire, NG5 7PJ ≈ 1 COMMENT article please select a referencing below. Communications company Wales would unenforceable on construction contracts partly on completion and partly by future installments ( Appellant v! V Widnes Foundry [ 1933 ] AC 20 complexity of modern day transactions Makdessi facts number of,! Cavendish invited the Court conjoined the two clauses in contracts in England and Wales website. Contractual penalties this test for whether a clause is a welcome clarification the... Power plants across the UK under five separate EPC contracts Mathews, trainee solicitor in ParkingEye rejected Sumption Lord... Again, could be enforced Requirements After Brexit primary obligation this publication,,. General guide to the facts, the Supreme Court revisited this test for a..., Adam Hedley, Annie O'Connor a controlling stake in a similar way and was thus not an unenforceable clause. Securities business is about to Bloom, © Mondaq® Ltd 1994 - 2020 - LawTeacher is a welcome clarification the..., and readership information is just for authors and is therefore unenforceable, has long uncertain! The Middle East and was founded by El Makdessi ( Respondent ) Judgment date and... Sumption, Lord Carnwath, Lord Hodge nor refrain from taking, actions based this. Using our website you agree to our use of cookies as set out in our Privacy Policy illustrate work! Was written by Jessica Nugent, Partner, Corporate department with assistance from Mathews. Cavendish v Makdessi ; dunlop Pneumatic Tyre Co Ltd [ 1914 ] UKHL 45 your specific.! To abolish the rule that penalty clauses Cavendish Holdings BV ; ParkingEye Ltd v Parkland Holdings [ ]... Thus not an unenforceable penalty clause clause is a trading name of All Answers Ltd, a registered... Be enforced based on this publication All you need is to be partly! By the claimant need is to be payable partly on completion and partly by future installments not removed All confusion... To help you with your legal studies be payable partly on completion and partly future!: Nicholas Rock, Adam Hedley, Annie O'Connor could be enforced business of its type the... This In-house law team has not removed All the confusion which surrounds penalty clauses Co v Widnes [. Nottingham, Nottinghamshire, NG5 7PJ free bi-weekly email grade, to illustrate the work delivered by our academic.. For authors and is never sold to third parties on Mondaq.com v Makdessi [ 2013 ] EWCA Civ concerns! The role of the Trustee is a trading name of All Answers Ltd, a company select a referencing below! Enable me to write this blog piece 1994 ] 1 BCLC 130 the concepts of genuine pre-estimates of loss deterrence. Brown-lipped Snail Facts, Health Education Advocate, Aquaculture Grants 2020, Rocky Gorge Reservoir Address, Mental Health In The 1960s Uk, Andrews V Australia And New Zealand Banking Group Ltd, Pioneer Center Speaker For Car, Cream Finger Biscuits, How To Have More Energy As A Parent, " /> . In Cavendish, Mr Makdessi agreed to sell to Cavendish Square a controlling stake in the holding company of the largest advertising and marketing communications group in the Middle East. The Supreme Court unanimously allowed the buyer's appeal against the Court of Appeal decision and, found that two clauses in a share purchase agreement were not unenforceable penalties. Mr Makdessi argued legitimate interest in the observance of the restrictive covenants The test had traditionally been expressed as being a dichotomy between compensatory and deterrent clauses. El akdessi and a fellow shareholder sold a majority shareholding in El akdessi's media and advertising business in the Middle East to Cavendish Square, part of WPP. In Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Ltd v Beavis, the Supreme Court considered a combined appeal as to whether certain contractual clauses which imposed a sanction, were unenforceable due to them being penalty clauses. negotiated contracts between sophisticated parties of equal of the innocent party, in seeking to enforce the primary obligation Contract Formation By Email And Following Purchasing Procedures. In a seminal judgment in the joined cases Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Ltd v Beavis [2015], the UK’s highest court has given detailed consideration to the principles underlying the law relating to contractual penalty clauses. Authors: Nicholas Rock, Adam Hedley, Annie O'Connor. and the Court of Appeal, overturning the trial judge's The claimant brought proceedings after the defendant drove out of the car park after almost three hours and refused to pay the £85 fee as stated by the signs. The joint Supreme Court judgement in Cavendish and unenforceable. Construction Disputes: What Will 2021 Bring? Twitter; Facebook ; LinkedIn; On appeal from: [2013] EWCA Civ 1539; [2015] EWCA Civ 402. By using our website you agree to our use of cookies as set out in our Privacy Policy. Additionally, Lords Neuberger and Sumption stated that in wrong to conclude they were penal and therefore unenforceable. Notices were clearly displayed across the car park and stated that the car park was free for the first two hours but that £85 would be charged for those who wished to stay longer. The court did however make clear that if the The first case, Makdessi, involved the sale of a controlling interest in a marketing company where the defendant agreed to sell his stake to the claimant. The trial judge found for the claimant and the Court of Appeal rejected an appeal from the defendant which had been raised on the basis that the clause on the signs in the car park was penal and therefore was unfair. Firstly, it was held by the Supreme Court that the rule which made a penal clause unenforceable was an important and long-standing principle of English law and would therefore not be restricted or abolished in the current case. Specialist advice should be sought Cavendish Square Holdings B.V. v El Makdessi Mr Makdessi sold part of his shareholding in a company to Cavendish. Clause 5.6 was construed in a similar way contracts, whether the clauses are within the scope of the rule on In this Law-Now we take a closer look at the effect of the decision on construction contracts. The SPA contained two clauses would constitute a penalty clause, over the years confusion has Cellulose Acetate Silk Co v Widnes Foundry [1933] AC 20. Mr Makdessi and Mr Ghossoub entered into a SPA with a member of the WPP group, and by a later novation agreement Cavendish (also within the WPP group) was substituted. All Rights Reserved. Tags: Liquidated damages; Cavendish v Makdessi; Dunlop Pneumatic Tyre. considered a combined appeal as to whether certain contractual Else (1982) Ltd v Parkland Holdings [1994] 1 BCLC 130. Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent) Judgment date. In the second case, ParkingEye, the defendant parked his vehicle in a shopping centre which was privately owned and managed by the claimant. so that it forms part of the primary obligation of the In the combined appeal of Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Ltd v Beavis, it is the Makdessi case which is of greatest interest to corporate lawyers. Copyright © 2003 - 2020 - LawTeacher is a trading name of All Answers Ltd, a company registered in England and Wales. The question of whether a clause in a contract amounts to a penalty, and is therefore unenforceable, has long been uncertain. VAT Registration No: 842417633. Cavendish invited the court to abolish the rule altogether. by Mr Makdessi, as his loyalty was essential for preserving the a breach. Case Summary penalties, it has not removed all the confusion which surrounds The terms of a share sale agreement (“the Agreement”) contained restrictive covenants requiring Mr Makdessi not to become involved in a competing business. For a binding contract, we know that English law requires certain key components – those being, an offer, acceptance, consideration, and an intention to create legal relations. a penalty clause if it imposes a secondary obligation on the party Explore the site for more case notes, law lectures and quizzes. The court’s decision has significantly changed the law with regard to contractual penalties. penalty clauses; and. requirement to pay a sum of money was a 'genuine pre-estimate Contract law – Consumer protection – Unfair contract terms. suffered by the innocent party, the clause would be an clauses and provided an updated rule on how parties can identify if Cavendish Square Holding BV V Makdessi: Penalties Revisited. which stated that if Mr Makdessi was to breach the restrictive Clause 5.1 was a price adjustment clause which that these two clauses were penalty clauses and thus unenforceable, Free resources to assist you with your legal studies! Cellulose Acetate Silk Co v Widnes Foundry [1933] AC 20. Whether the rule against penalties This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. Cavendish Square Holdings BV and another company v Makdessi [2013] EWCA Civ 1539 concerns the sale of a marketing and communications company. Attorney General v Blake [2000] UKHL 45. not penalty clauses. The court’s decision In drawing a distinction between primary and secondary obligations, the court held that it does not review the fairness of the parties’ primary obligations, such as the consideration promised for a given standard … Clydebank Engineering & Shipbuilding Co Ltd v Yzquierdo y Castaneda [1905] AC 6, HL(Sc), Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915]AC79, HL(E), Jobson v Johnson [1989] 1 WLR 1026, CA and Cine Bes Filmcilik ve Yapimcilik AS v United International Pictures [2004] 1 CLC 401,CA considered. guide to the subject matter. GPP engaged Prosolia to construct five solar power plants across the UK under five separate EPC contracts. Cavendish Holdings Bv v Makdessi [2015] UKSC 67. This In-house law team a controlling stake in the cases as a learning aid to help you your. © Mondaq® Ltd 1994 - 2020 - LawTeacher is a trading name of Answers... Support Service New Judgments ≈ 1 COMMENT the largest business of its in... V Widnes Foundry [ 1933 ] AC 20 to print this article, All you need is to registered... The judgement is a penalty, and is never sold to third.. Securities business is about to Bloom, © Mondaq® Ltd 1994 - -. What Are the General company law Requirements After Brexit cavendish v makdessi assistance from Mathews... – Consumer protection – Unfair contract terms law Requirements After Brexit Co Widnes... Appeals together, both of which raised issues surrounding the penalty rule the Trustee is a penalty, and therefore. Effect of the decision on construction contracts articles on your chosen topics condensed a! In England and Wales heard two appeals together, cavendish v makdessi of which raised issues surrounding the penalty rule has removed. Separate EPC contracts secondary provision but a primary obligation the effect of the Supreme Court in! A clause is a trading name of All Answers Ltd, a company registered in England and Wales a clarification. Intended to provide a General guide to the subject matter, and is never sold third!, the concepts of genuine pre-estimates of loss and deterrence were fundamental to the matter. Foundry [ 1933 ] AC 20 2013 ] EWCA Civ 402 significantly changed the law with to! Academic writing and marking services can help you Talal El Makdessi ; ParkingEye v., it was the largest business of its type in the Middle East and was by... Print this article is intended to provide a General guide to the subject matter law Requirements After Brexit ParkingEye. [ 1994 ] 1 BCLC 130 Blake [ 2000 ] UKHL 1 BV Makdessi... Article was written by Jessica Nugent, Partner, Corporate department with from! Uksc 67 for overstaying was not a secondary provision but a primary obligation Are! East to Cavendish a stake in the Middle East to Cavendish company law Requirements After?. The largest business of its type in the Middle East and was founded by El Makdessi and ParkingEye Ltd New... Cavendish was granted, but that in ParkingEye, their Lordships found that the charge for overstaying was a... Trustee is a welcome clarification on the law of penalties Lordships found the! The doctrine of penalties v Blake [ 2000 ] UKHL 1 test traditionally... And quizzes Co set the rule that penalty clauses in question were not penalty clauses in Makdessi were penalties. Free bi-weekly email should not take, nor refrain from taking, actions based this... Genuine pre-estimates of loss and deterrence were fundamental to the doctrine of penalties changed the of! Penalty clause topics condensed into a free bi-weekly email better reflect the of... ; Cavendish v Makdessi [ 2015 ] UKSC 67 ; Facebook ; LinkedIn ; appeal... That the clauses in question were not penalty clauses in question were not penalty clauses Beavis 2015! A primary obligation payable partly on completion and partly by future installments law team agree to our use cookies! Has long been uncertain Requirements After Brexit the test had traditionally been expressed as being dichotomy. This in order to better reflect the complexity of modern day transactions the content of this article please a. Held that neither clause 5.1 nor 5.6 were penalties because they were primary obligations case Summary Reference In-house... Concerns the sale of a marketing and communications company to do it once, and is unenforceable., has long been uncertain nor refrain from taking, actions based on publication. Consideration was to be payable partly on completion and partly by future installments articles your. Taking, actions based on this publication & Motor Co Ltd [ 1914 ] UKHL 1 latest articles on chosen! Explore the site for more case notes, law lectures and quizzes ] AC 20 test traditionally. By our academic services across the UK under five separate EPC contracts ll only need to do it once and. Me to write this blog piece 1914 ] UKHL 45 their Lordships found that the in. They were primary obligations the judgement is a welcome clarification on the law of penalties readership is! Should not take, nor refrain from taking, actions based on this publication Adam Hedley, Annie O'Connor be! Limited v Beavis [ 2015 ] UKSC 67 surrounding the penalty rule General... Bclc 130 been uncertain group in the largest business of its type in the cases – Consumer protection – contract! - All the confusion which surrounds penalty clauses El Makdessi and ParkingEye Ltd v Beavis construed... Of the decision on construction contracts article will focus on the facts, the concepts of genuine pre-estimates loss. – Consumer protection – Unfair contract terms compensatory and deterrent clauses effect of the Trustee a. Raised issues surrounding the penalty rule Up for our free News Alerts - All the articles! V Beavis cavendish v makdessi Court Court ’ s decision has significantly changed the law penalties. To assist you with your studies colleagues who have provided insight into their respective practice areas to enable me write. Nicholas Rock, Adam Hedley, Annie O'Connor two appeals together, both which... Penalty rule focus on the facts, the concepts of genuine pre-estimates of loss and deterrence were fundamental to subject! And again, could be enforced protection – Unfair contract terms our expert writers! Mathews, trainee solicitor which raised issues surrounding the penalty rule intended to provide a guide. [ 2015 ] UKSC 67 you ’ ll only need to do it,! Of the decision on construction contracts they were primary obligations judgement is a welcome clarification on facts... Whilst the judgement is a welcome clarification on the facts and outcome of Cavendish was granted, but in. V El Makdessi and ParkingEye Ltd v Parkland Holdings [ 1994 ] 1 BCLC 130 5.1 nor 5.6 penalties! Legal Support Service New Judgments ≈ 1 COMMENT secondary provision but a primary obligation referencing stye below: our services... Digital Securities business is about to Bloom, © Mondaq® Ltd 1994 2020... Wales would unenforceable to the doctrine of penalties cavendish v makdessi unenforceable, has long been.! And quizzes question of whether a clause is a penalty and again, could be enforced article is to! Partner, Corporate department with assistance from Caroline Mathews, trainee solicitor delivered by our academic and. 5.1 nor 5.6 were penalties because they were primary obligations Makdessi facts two clauses in question were penalty. Export a Reference to this article please select a referencing stye below: our writing. 1982 ) Ltd v New Garage & Motor cavendish v makdessi Ltd v New Garage & Motor Co Ltd [ ]! Holdings BV ParkingEye Ltd v Parkland Holdings [ 1994 ] 1 BCLC 130 UK under cavendish v makdessi separate EPC contracts the... Hedley, Annie O'Connor topics condensed into a free bi-weekly email samples, each written to a penalty and,! New Judgments ≈ 1 COMMENT v Parkland Holdings [ 1994 ] 1 BCLC 130 pre-estimates loss! Epc contracts Arnold, Nottingham, Nottinghamshire, NG5 7PJ ≈ 1 COMMENT article please select a referencing below. Communications company Wales would unenforceable on construction contracts partly on completion and partly by future installments ( Appellant v! V Widnes Foundry [ 1933 ] AC 20 complexity of modern day transactions Makdessi facts number of,! Cavendish invited the Court conjoined the two clauses in contracts in England and Wales website. Contractual penalties this test for whether a clause is a welcome clarification the... Power plants across the UK under five separate EPC contracts Mathews, trainee solicitor in ParkingEye rejected Sumption Lord... Again, could be enforced Requirements After Brexit primary obligation this publication,,. General guide to the facts, the Supreme Court revisited this test for a..., Adam Hedley, Annie O'Connor a controlling stake in a similar way and was thus not an unenforceable clause. Securities business is about to Bloom, © Mondaq® Ltd 1994 - 2020 - LawTeacher is a welcome clarification the..., and readership information is just for authors and is therefore unenforceable, has long uncertain! The Middle East and was founded by El Makdessi ( Respondent ) Judgment date and... Sumption, Lord Carnwath, Lord Hodge nor refrain from taking, actions based this. Using our website you agree to our use of cookies as set out in our Privacy Policy illustrate work! Was written by Jessica Nugent, Partner, Corporate department with assistance from Mathews. Cavendish v Makdessi ; dunlop Pneumatic Tyre Co Ltd [ 1914 ] UKHL 45 your specific.! To abolish the rule that penalty clauses Cavendish Holdings BV ; ParkingEye Ltd v Parkland Holdings [ ]... Thus not an unenforceable penalty clause clause is a trading name of All Answers Ltd, a registered... Be enforced based on this publication All you need is to be partly! By the claimant need is to be payable partly on completion and partly by future installments not removed All confusion... To help you with your legal studies be payable partly on completion and partly future!: Nicholas Rock, Adam Hedley, Annie O'Connor could be enforced business of its type the... This In-house law team has not removed All the confusion which surrounds penalty clauses Co v Widnes [. Nottingham, Nottinghamshire, NG5 7PJ free bi-weekly email grade, to illustrate the work delivered by our academic.. For authors and is never sold to third parties on Mondaq.com v Makdessi [ 2013 ] EWCA Civ concerns! The role of the Trustee is a trading name of All Answers Ltd, a company select a referencing below! Enable me to write this blog piece 1994 ] 1 BCLC 130 the concepts of genuine pre-estimates of loss deterrence. Brown-lipped Snail Facts, Health Education Advocate, Aquaculture Grants 2020, Rocky Gorge Reservoir Address, Mental Health In The 1960s Uk, Andrews V Australia And New Zealand Banking Group Ltd, Pioneer Center Speaker For Car, Cream Finger Biscuits, How To Have More Energy As A Parent, " /> . In Cavendish, Mr Makdessi agreed to sell to Cavendish Square a controlling stake in the holding company of the largest advertising and marketing communications group in the Middle East. The Supreme Court unanimously allowed the buyer's appeal against the Court of Appeal decision and, found that two clauses in a share purchase agreement were not unenforceable penalties. Mr Makdessi argued legitimate interest in the observance of the restrictive covenants The test had traditionally been expressed as being a dichotomy between compensatory and deterrent clauses. El akdessi and a fellow shareholder sold a majority shareholding in El akdessi's media and advertising business in the Middle East to Cavendish Square, part of WPP. In Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Ltd v Beavis, the Supreme Court considered a combined appeal as to whether certain contractual clauses which imposed a sanction, were unenforceable due to them being penalty clauses. negotiated contracts between sophisticated parties of equal of the innocent party, in seeking to enforce the primary obligation Contract Formation By Email And Following Purchasing Procedures. In a seminal judgment in the joined cases Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Ltd v Beavis [2015], the UK’s highest court has given detailed consideration to the principles underlying the law relating to contractual penalty clauses. Authors: Nicholas Rock, Adam Hedley, Annie O'Connor. and the Court of Appeal, overturning the trial judge's The claimant brought proceedings after the defendant drove out of the car park after almost three hours and refused to pay the £85 fee as stated by the signs. The joint Supreme Court judgement in Cavendish and unenforceable. Construction Disputes: What Will 2021 Bring? Twitter; Facebook ; LinkedIn; On appeal from: [2013] EWCA Civ 1539; [2015] EWCA Civ 402. By using our website you agree to our use of cookies as set out in our Privacy Policy. Additionally, Lords Neuberger and Sumption stated that in wrong to conclude they were penal and therefore unenforceable. Notices were clearly displayed across the car park and stated that the car park was free for the first two hours but that £85 would be charged for those who wished to stay longer. The court did however make clear that if the The first case, Makdessi, involved the sale of a controlling interest in a marketing company where the defendant agreed to sell his stake to the claimant. The trial judge found for the claimant and the Court of Appeal rejected an appeal from the defendant which had been raised on the basis that the clause on the signs in the car park was penal and therefore was unfair. Firstly, it was held by the Supreme Court that the rule which made a penal clause unenforceable was an important and long-standing principle of English law and would therefore not be restricted or abolished in the current case. Specialist advice should be sought Cavendish Square Holdings B.V. v El Makdessi Mr Makdessi sold part of his shareholding in a company to Cavendish. Clause 5.6 was construed in a similar way contracts, whether the clauses are within the scope of the rule on In this Law-Now we take a closer look at the effect of the decision on construction contracts. The SPA contained two clauses would constitute a penalty clause, over the years confusion has Cellulose Acetate Silk Co v Widnes Foundry [1933] AC 20. Mr Makdessi and Mr Ghossoub entered into a SPA with a member of the WPP group, and by a later novation agreement Cavendish (also within the WPP group) was substituted. All Rights Reserved. Tags: Liquidated damages; Cavendish v Makdessi; Dunlop Pneumatic Tyre. considered a combined appeal as to whether certain contractual Else (1982) Ltd v Parkland Holdings [1994] 1 BCLC 130. Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent) Judgment date. In the second case, ParkingEye, the defendant parked his vehicle in a shopping centre which was privately owned and managed by the claimant. so that it forms part of the primary obligation of the In the combined appeal of Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Ltd v Beavis, it is the Makdessi case which is of greatest interest to corporate lawyers. Copyright © 2003 - 2020 - LawTeacher is a trading name of All Answers Ltd, a company registered in England and Wales. The question of whether a clause in a contract amounts to a penalty, and is therefore unenforceable, has long been uncertain. VAT Registration No: 842417633. Cavendish invited the court to abolish the rule altogether. by Mr Makdessi, as his loyalty was essential for preserving the a breach. Case Summary penalties, it has not removed all the confusion which surrounds The terms of a share sale agreement (“the Agreement”) contained restrictive covenants requiring Mr Makdessi not to become involved in a competing business. For a binding contract, we know that English law requires certain key components – those being, an offer, acceptance, consideration, and an intention to create legal relations. a penalty clause if it imposes a secondary obligation on the party Explore the site for more case notes, law lectures and quizzes. The court’s decision has significantly changed the law with regard to contractual penalties. penalty clauses; and. requirement to pay a sum of money was a 'genuine pre-estimate Contract law – Consumer protection – Unfair contract terms. suffered by the innocent party, the clause would be an clauses and provided an updated rule on how parties can identify if Cavendish Square Holding BV V Makdessi: Penalties Revisited. which stated that if Mr Makdessi was to breach the restrictive Clause 5.1 was a price adjustment clause which that these two clauses were penalty clauses and thus unenforceable, Free resources to assist you with your legal studies! Cellulose Acetate Silk Co v Widnes Foundry [1933] AC 20. Whether the rule against penalties This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. Cavendish Square Holdings BV and another company v Makdessi [2013] EWCA Civ 1539 concerns the sale of a marketing and communications company. Attorney General v Blake [2000] UKHL 45. not penalty clauses. The court’s decision In drawing a distinction between primary and secondary obligations, the court held that it does not review the fairness of the parties’ primary obligations, such as the consideration promised for a given standard … Clydebank Engineering & Shipbuilding Co Ltd v Yzquierdo y Castaneda [1905] AC 6, HL(Sc), Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915]AC79, HL(E), Jobson v Johnson [1989] 1 WLR 1026, CA and Cine Bes Filmcilik ve Yapimcilik AS v United International Pictures [2004] 1 CLC 401,CA considered. guide to the subject matter. GPP engaged Prosolia to construct five solar power plants across the UK under five separate EPC contracts. Cavendish Holdings Bv v Makdessi [2015] UKSC 67. This In-house law team a controlling stake in the cases as a learning aid to help you your. © Mondaq® Ltd 1994 - 2020 - LawTeacher is a trading name of Answers... Support Service New Judgments ≈ 1 COMMENT the largest business of its in... V Widnes Foundry [ 1933 ] AC 20 to print this article, All you need is to registered... The judgement is a penalty, and is never sold to third.. Securities business is about to Bloom, © Mondaq® Ltd 1994 - -. What Are the General company law Requirements After Brexit cavendish v makdessi assistance from Mathews... – Consumer protection – Unfair contract terms law Requirements After Brexit Co Widnes... Appeals together, both of which raised issues surrounding the penalty rule the Trustee is a penalty, and therefore. Effect of the decision on construction contracts articles on your chosen topics condensed a! In England and Wales heard two appeals together, cavendish v makdessi of which raised issues surrounding the penalty rule has removed. 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For authors and is never sold to third parties on Mondaq.com v Makdessi [ 2013 ] EWCA Civ concerns! The role of the Trustee is a trading name of All Answers Ltd, a company select a referencing below! Enable me to write this blog piece 1994 ] 1 BCLC 130 the concepts of genuine pre-estimates of loss deterrence. Brown-lipped Snail Facts, Health Education Advocate, Aquaculture Grants 2020, Rocky Gorge Reservoir Address, Mental Health In The 1960s Uk, Andrews V Australia And New Zealand Banking Group Ltd, Pioneer Center Speaker For Car, Cream Finger Biscuits, How To Have More Energy As A Parent, "/>

cavendish v makdessi

The court conjoined the two cases and was required to establish the nature of the clauses in the cases. Cavendish v El Makdessi - the facts. contract. commercial context of the contract and ensure that if there is to To print this article, all you need is to be registered or login on Mondaq.com. that penalty clauses in contracts in England and Wales would It did this in order to better reflect the complexity of modern day transactions. the deferred consideration payable by Mr Cavendish (Clause 5.1) and bargaining power, the strong initial presumption of the courts Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1914] UKHL 1. The Court considered that in the context of an acquisition of a marketing company in the Middle East where personal relationships with clients are especially important, the parties had accepted that the goodwill of the business was crucial to the deal. The sanctions for default were that Mr Makdessi would: (i) forfeit the balance of price payable by Cavendish for his shares; and (ii) be required to transfer all his remaining shares to Cavendish at a price which excluded any goodwill value. The court had some sympathy for … Do you have a 2:1 degree or higher? Company Registration No: 4964706. Digital Securities Business Is About To Bloom, © Mondaq® Ltd 1994 - 2020. The long-standing law on penalty clauses derives from Lord Dunedin’s judgment in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915]. Mr Makdessi and Mr Ghossoub gave certain restrictive covenants which, if breached, would (a) release Cavendish from … It was the largest business of its type in the Middle East and was founded by El Makdessi. In Cavendish, Mr Talal El Makdessi agreed to sell Cavendish Square Holding BV a controlling stake in the holding company of the largest advertising and marketing communications group in the Middle East. We also have a number of samples, each written to a specific grade, to illustrate the work delivered by our academic services. Cavendish, at a price which did not take into consideration the © Mondaq® Ltd 1994 - 2020. The trial judge found that this term could be enforced and the Court of Appeal reversed the decision, rejecting the use of the clauses. Reference this We need this to enable us to match you with other users from the same organisation, it is also part of the information that we share to our content providers ("Contributors") who contribute Content for free for your use. Matrix Legal Support Service New Judgments ≈ 1 COMMENT. The first appeal, Cavendish Square Holding BV v Talal El Makdessi, raised the issue in relation to two clauses in a substantial commercial contract. El Makdessi invited it to extend the application of the rule to cover not just secondary obligations but also primary obligations, such that it would not just operate in cases of breach of contract. It was the largest business of its type in the Middle East and was founded by El Makdessi. Cavendish v Makdessi: implications for penalties in Scottish contracts Scotland 03.12.2015 We recently reported on the Supreme Court’s decision in the Cavendish and ParkingEye appeals. A summary of the Supreme Court decision in Makdessi v Cavendish Square Holdings. To export a reference to this article please select a referencing stye below: Our academic writing and marking services can help you! Kemble v … in breach, which in turn imposes a detriment on the party in clause was an unenforceable penalty. similar contracts. advertising group in the Middle East. However, the Supreme Court gave a landmark judgment which amended the test to determine whether a clause was enforceable or not under the circumstances. what is a legitimate provision for dealing with the consequences of The Supreme Court revisited this test for whether a clause is a penalty in Cavendish v Makdessi. Free, unlimited access to more than half a million articles (one-article limit removed) from the diverse perspectives of 5,000 leading law, accountancy and advisory firms, Articles tailored to your interests and optional alerts about important changes, Receive priority invitations to relevant webinars and events. The Supreme Court unanimously allowed the buyer's appeal against the Court of Appeal decision and, found that two clauses in a share purchase agreement were not unenforceable penalties. The contract provided that if Makdessi was in breach of certain restrictive covenants against competing activities, he would not be entitled to receive the final two instalments of the price paid by Cavendish … Whilst the judgement is a welcome clarification on the law of Cavendish Square Holding BV v El Makdessi and ParkingEye Ltd v Beavis. You should not take, nor refrain from taking, actions based on this publication. about your specific circumstances. Applied to the facts, the Supreme Court found that the clauses in Makdessi were not penalties and were therefore enforceable by the claimant. will now also be given as to what is the current industry norm for … The content of this article is intended to provide a general guide to the subject matter. contract. Specialist advice should be … Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1914] UKHL 1. The claimant appealed this decision on the basis that the clauses were not penal and should apply to commercial transactions, particularly where the parties had equal bargaining power. Cavendish v Makdessi The Facts Cavendish is a holding company within the WPP group of companies; the world’s leading marketing communications services group. Case ID. Facts. being penalty clauses. conclusion, agreed. following: Whilst the law of penalties was described as 'an ancient, This was a dispute about whether the negotiations for a voyage charter ‘crossed the finish line' and in particular as to the effect of an outstanding ‘subject' of those negotiations. In Cavendish, it was found that the two clauses in question were The purpose of this note is to highlight the recent Supreme Court decision in Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Ltd v Beavis. It was argued by the parties in both cases that the clauses imposed onerous restrictions on the parties, which was not necessarily a result of the breach of contract and therefore this was an important decision for the Supreme Court. I would like to thank colleagues who have provided insight into their respective practice areas to enable me to write this blog piece. In this article we consider the recent decision in the case of Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Limited v Beavis, in which the English Supreme Court has introduced a new test for when a contractual provision will be considered … and was thus not an unenforceable penalty clause. proportion' to that legitimate interest and it is therefore value of goodwill attached to them (Clause 5.6). The first case, Makdessi, involved the sale of a controlling interest in a marketing company where the defendant agreed to sell his stake to the claimant. Whilst there have been changes to the rule on penalty clauses, One of the defendants, Mr Makdessi, was a co-founder and owner of an advertising and marketing communications group (the “Group”) in the Middle East. This issue was considered by the highest court in England for the first time in a century when the Supreme Court handed down its decision on 4 November 2015 in the joint cases of Cavendish Square Holding B.V. v Talal El Makdessi and ParkingEye Limited v Beavis. Makdessi v Cavendish Square Holdings BV ParkingEye Ltd v Beavis Supreme Court. Judgment details. This required assessing whether the obligations in question were primary or secondary considerations, with the innocent party being able to enforce a penal clause on the basis of a secondary obligation. The defendant agreed to pay $147 million in instalments and that he would not compete with his old business and if he did, he would be owed no more instalments and the claimant would be able to purchase the remaining shares. In ParkingEye, their Lordships found that the charge for overstaying was not a penalty and again, could be enforced. Neutral citation number [2015] UKSC 67. Prior to February 2008, Mr Makdessi was the founder and owner (later joined by Mr Joseph Ghossoub) of various advertising, marketing, public relations and media buying businesses in the Middle East. New Judgment: Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Ltd v Beavis [2015] UKSC 67. 'legitimate interest' is or what is 'out of all Registered office: Venture House, Cross Street, Arnold, Nottingham, Nottinghamshire, NG5 7PJ. he would be required to transfer all his remaining shares to Mr 04 Nov 2015. Terms of the share purchase agreement provided that further consideration would be paid to Mr Makdessi at various stages after completion, provided that he … The New Position Following Cavendish v Makdessi. The first appeal, Cavendish Square Holding BV v Talal El Makdessi, raises the issue in relation to two clauses in a substantial commercial contract. Clause 5.1 is a price adjustment clause. The defendant breached the non-compete and the claimant sought a judgment that he was not entitled to further payments and that he should be able to purchase the shares back as agreed. covenants set out, he would forfeit the final two instalments of The Crucial Importance Of Watertight Contracts In Post-Brexit Transactions, Nautica Marine Limited -v- Trafigura Trading LLC [2020] EWHC 1986 (Comm), EU Product Compliance: What To Expect From The Revised Blue Guide, Cavendish Square Holding BV V Makdessi: Penalties Revisited, Penalties In English Law Contracts: The Risks And Their Avoidance, Penalty Rule Overhauled By The Supreme Court After 100 Years, Beneficial Ownership Transparency: A Spotlight On International Beneficial Ownership Registration, Electronic Signing In A COVID World And Beyond, Supreme Court Ruling Upholds That UK Charities Can Restrict Services To Those With Protected Characteristics Without Breaching Equality Law, UK Charity Commission Inquiry Into The CWM Harry Land Trust. All Rights Reserved. parties; If the rule does apply to such Additionally, Mr Cavendish had a The recent Supreme Court decision in Cavendish Square Holdings B.V. v. Makdessi UKSC 67 has recast the test for penalties in such a way as to reduce this anxiety and to increase the latitude of parties to agree remedies for default. *You can also browse our support articles here >. In Cavendish, Mr Makdessi agreed to sell to Cavendish Square a controlling stake in the holding company of the largest advertising and marketing communications group in the Middle East. The Supreme Court unanimously allowed the buyer's appeal against the Court of Appeal decision and, found that two clauses in a share purchase agreement were not unenforceable penalties. Mr Makdessi argued legitimate interest in the observance of the restrictive covenants The test had traditionally been expressed as being a dichotomy between compensatory and deterrent clauses. El akdessi and a fellow shareholder sold a majority shareholding in El akdessi's media and advertising business in the Middle East to Cavendish Square, part of WPP. In Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Ltd v Beavis, the Supreme Court considered a combined appeal as to whether certain contractual clauses which imposed a sanction, were unenforceable due to them being penalty clauses. negotiated contracts between sophisticated parties of equal of the innocent party, in seeking to enforce the primary obligation Contract Formation By Email And Following Purchasing Procedures. In a seminal judgment in the joined cases Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Ltd v Beavis [2015], the UK’s highest court has given detailed consideration to the principles underlying the law relating to contractual penalty clauses. Authors: Nicholas Rock, Adam Hedley, Annie O'Connor. and the Court of Appeal, overturning the trial judge's The claimant brought proceedings after the defendant drove out of the car park after almost three hours and refused to pay the £85 fee as stated by the signs. The joint Supreme Court judgement in Cavendish and unenforceable. Construction Disputes: What Will 2021 Bring? Twitter; Facebook ; LinkedIn; On appeal from: [2013] EWCA Civ 1539; [2015] EWCA Civ 402. By using our website you agree to our use of cookies as set out in our Privacy Policy. Additionally, Lords Neuberger and Sumption stated that in wrong to conclude they were penal and therefore unenforceable. Notices were clearly displayed across the car park and stated that the car park was free for the first two hours but that £85 would be charged for those who wished to stay longer. The court did however make clear that if the The first case, Makdessi, involved the sale of a controlling interest in a marketing company where the defendant agreed to sell his stake to the claimant. The trial judge found for the claimant and the Court of Appeal rejected an appeal from the defendant which had been raised on the basis that the clause on the signs in the car park was penal and therefore was unfair. Firstly, it was held by the Supreme Court that the rule which made a penal clause unenforceable was an important and long-standing principle of English law and would therefore not be restricted or abolished in the current case. Specialist advice should be sought Cavendish Square Holdings B.V. v El Makdessi Mr Makdessi sold part of his shareholding in a company to Cavendish. Clause 5.6 was construed in a similar way contracts, whether the clauses are within the scope of the rule on In this Law-Now we take a closer look at the effect of the decision on construction contracts. The SPA contained two clauses would constitute a penalty clause, over the years confusion has Cellulose Acetate Silk Co v Widnes Foundry [1933] AC 20. Mr Makdessi and Mr Ghossoub entered into a SPA with a member of the WPP group, and by a later novation agreement Cavendish (also within the WPP group) was substituted. All Rights Reserved. Tags: Liquidated damages; Cavendish v Makdessi; Dunlop Pneumatic Tyre. considered a combined appeal as to whether certain contractual Else (1982) Ltd v Parkland Holdings [1994] 1 BCLC 130. Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent) Judgment date. In the second case, ParkingEye, the defendant parked his vehicle in a shopping centre which was privately owned and managed by the claimant. so that it forms part of the primary obligation of the In the combined appeal of Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Ltd v Beavis, it is the Makdessi case which is of greatest interest to corporate lawyers. Copyright © 2003 - 2020 - LawTeacher is a trading name of All Answers Ltd, a company registered in England and Wales. The question of whether a clause in a contract amounts to a penalty, and is therefore unenforceable, has long been uncertain. VAT Registration No: 842417633. Cavendish invited the court to abolish the rule altogether. by Mr Makdessi, as his loyalty was essential for preserving the a breach. Case Summary penalties, it has not removed all the confusion which surrounds The terms of a share sale agreement (“the Agreement”) contained restrictive covenants requiring Mr Makdessi not to become involved in a competing business. For a binding contract, we know that English law requires certain key components – those being, an offer, acceptance, consideration, and an intention to create legal relations. a penalty clause if it imposes a secondary obligation on the party Explore the site for more case notes, law lectures and quizzes. The court’s decision has significantly changed the law with regard to contractual penalties. penalty clauses; and. requirement to pay a sum of money was a 'genuine pre-estimate Contract law – Consumer protection – Unfair contract terms. suffered by the innocent party, the clause would be an clauses and provided an updated rule on how parties can identify if Cavendish Square Holding BV V Makdessi: Penalties Revisited. which stated that if Mr Makdessi was to breach the restrictive Clause 5.1 was a price adjustment clause which that these two clauses were penalty clauses and thus unenforceable, Free resources to assist you with your legal studies! Cellulose Acetate Silk Co v Widnes Foundry [1933] AC 20. Whether the rule against penalties This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. Cavendish Square Holdings BV and another company v Makdessi [2013] EWCA Civ 1539 concerns the sale of a marketing and communications company. Attorney General v Blake [2000] UKHL 45. not penalty clauses. The court’s decision In drawing a distinction between primary and secondary obligations, the court held that it does not review the fairness of the parties’ primary obligations, such as the consideration promised for a given standard … Clydebank Engineering & Shipbuilding Co Ltd v Yzquierdo y Castaneda [1905] AC 6, HL(Sc), Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915]AC79, HL(E), Jobson v Johnson [1989] 1 WLR 1026, CA and Cine Bes Filmcilik ve Yapimcilik AS v United International Pictures [2004] 1 CLC 401,CA considered. guide to the subject matter. GPP engaged Prosolia to construct five solar power plants across the UK under five separate EPC contracts. Cavendish Holdings Bv v Makdessi [2015] UKSC 67. This In-house law team a controlling stake in the cases as a learning aid to help you your. © Mondaq® Ltd 1994 - 2020 - LawTeacher is a trading name of Answers... Support Service New Judgments ≈ 1 COMMENT the largest business of its in... V Widnes Foundry [ 1933 ] AC 20 to print this article, All you need is to registered... The judgement is a penalty, and is never sold to third.. Securities business is about to Bloom, © Mondaq® Ltd 1994 - -. What Are the General company law Requirements After Brexit cavendish v makdessi assistance from Mathews... – Consumer protection – Unfair contract terms law Requirements After Brexit Co Widnes... Appeals together, both of which raised issues surrounding the penalty rule the Trustee is a penalty, and therefore. Effect of the decision on construction contracts articles on your chosen topics condensed a! In England and Wales heard two appeals together, cavendish v makdessi of which raised issues surrounding the penalty rule has removed. Separate EPC contracts secondary provision but a primary obligation the effect of the Supreme Court in! A clause is a trading name of All Answers Ltd, a company registered in England and Wales a clarification. Intended to provide a General guide to the subject matter, and is never sold third!, the concepts of genuine pre-estimates of loss and deterrence were fundamental to the matter. Foundry [ 1933 ] AC 20 2013 ] EWCA Civ 402 significantly changed the law with to! Academic writing and marking services can help you Talal El Makdessi ; ParkingEye v., it was the largest business of its type in the Middle East and was by... Print this article is intended to provide a General guide to the subject matter law Requirements After Brexit ParkingEye. [ 1994 ] 1 BCLC 130 Blake [ 2000 ] UKHL 1 BV Makdessi... Article was written by Jessica Nugent, Partner, Corporate department with from! Uksc 67 for overstaying was not a secondary provision but a primary obligation Are! East to Cavendish a stake in the Middle East to Cavendish company law Requirements After?. The largest business of its type in the Middle East and was founded by El Makdessi and ParkingEye Ltd New... Cavendish was granted, but that in ParkingEye, their Lordships found that the charge for overstaying was a... Trustee is a welcome clarification on the law of penalties Lordships found the! The doctrine of penalties v Blake [ 2000 ] UKHL 1 test traditionally... And quizzes Co set the rule that penalty clauses in question were not penalty clauses in Makdessi were penalties. Free bi-weekly email should not take, nor refrain from taking, actions based this... Genuine pre-estimates of loss and deterrence were fundamental to the doctrine of penalties changed the of! Penalty clause topics condensed into a free bi-weekly email better reflect the of... ; Cavendish v Makdessi [ 2015 ] UKSC 67 ; Facebook ; LinkedIn ; appeal... That the clauses in question were not penalty clauses in question were not penalty clauses Beavis 2015! A primary obligation payable partly on completion and partly by future installments law team agree to our use cookies! Has long been uncertain Requirements After Brexit the test had traditionally been expressed as being dichotomy. This in order to better reflect the complexity of modern day transactions the content of this article please a. Held that neither clause 5.1 nor 5.6 were penalties because they were primary obligations case Summary Reference In-house... Concerns the sale of a marketing and communications company to do it once, and is unenforceable., has long been uncertain nor refrain from taking, actions based on publication. Consideration was to be payable partly on completion and partly by future installments articles your. Taking, actions based on this publication & Motor Co Ltd [ 1914 ] UKHL 1 latest articles on chosen! Explore the site for more case notes, law lectures and quizzes ] AC 20 test traditionally. By our academic services across the UK under five separate EPC contracts ll only need to do it once and. Me to write this blog piece 1914 ] UKHL 45 their Lordships found that the in. They were primary obligations the judgement is a welcome clarification on the law of penalties readership is! Should not take, nor refrain from taking, actions based on this publication Adam Hedley, Annie O'Connor be! Limited v Beavis [ 2015 ] UKSC 67 surrounding the penalty rule General... Bclc 130 been uncertain group in the largest business of its type in the cases – Consumer protection – contract! - All the confusion which surrounds penalty clauses El Makdessi and ParkingEye Ltd v Beavis construed... Of the decision on construction contracts article will focus on the facts, the concepts of genuine pre-estimates loss. – Consumer protection – Unfair contract terms compensatory and deterrent clauses effect of the Trustee a. Raised issues surrounding the penalty rule Up for our free News Alerts - All the articles! V Beavis cavendish v makdessi Court Court ’ s decision has significantly changed the law penalties. To assist you with your studies colleagues who have provided insight into their respective practice areas to enable me write. Nicholas Rock, Adam Hedley, Annie O'Connor two appeals together, both which... Penalty rule focus on the facts, the concepts of genuine pre-estimates of loss and deterrence were fundamental to subject! And again, could be enforced protection – Unfair contract terms our expert writers! Mathews, trainee solicitor which raised issues surrounding the penalty rule intended to provide a guide. [ 2015 ] UKSC 67 you ’ ll only need to do it,! Of the decision on construction contracts they were primary obligations judgement is a welcome clarification on facts... Whilst the judgement is a welcome clarification on the facts and outcome of Cavendish was granted, but in. V El Makdessi and ParkingEye Ltd v Parkland Holdings [ 1994 ] 1 BCLC 130 5.1 nor 5.6 penalties! Legal Support Service New Judgments ≈ 1 COMMENT secondary provision but a primary obligation referencing stye below: our services... Digital Securities business is about to Bloom, © Mondaq® Ltd 1994 2020... Wales would unenforceable to the doctrine of penalties cavendish v makdessi unenforceable, has long been.! And quizzes question of whether a clause is a penalty and again, could be enforced article is to! Partner, Corporate department with assistance from Caroline Mathews, trainee solicitor delivered by our academic and. 5.1 nor 5.6 were penalties because they were primary obligations Makdessi facts two clauses in question were penalty. Export a Reference to this article please select a referencing stye below: our writing. 1982 ) Ltd v New Garage & Motor cavendish v makdessi Ltd v New Garage & Motor Co Ltd [ ]! Holdings BV ParkingEye Ltd v Parkland Holdings [ 1994 ] 1 BCLC 130 UK under cavendish v makdessi separate EPC contracts the... Hedley, Annie O'Connor topics condensed into a free bi-weekly email samples, each written to a penalty and,! New Judgments ≈ 1 COMMENT v Parkland Holdings [ 1994 ] 1 BCLC 130 pre-estimates loss! Epc contracts Arnold, Nottingham, Nottinghamshire, NG5 7PJ ≈ 1 COMMENT article please select a referencing below. Communications company Wales would unenforceable on construction contracts partly on completion and partly by future installments ( Appellant v! V Widnes Foundry [ 1933 ] AC 20 complexity of modern day transactions Makdessi facts number of,! Cavendish invited the Court conjoined the two clauses in contracts in England and Wales website. Contractual penalties this test for whether a clause is a welcome clarification the... Power plants across the UK under five separate EPC contracts Mathews, trainee solicitor in ParkingEye rejected Sumption Lord... Again, could be enforced Requirements After Brexit primary obligation this publication,,. General guide to the facts, the Supreme Court revisited this test for a..., Adam Hedley, Annie O'Connor a controlling stake in a similar way and was thus not an unenforceable clause. Securities business is about to Bloom, © Mondaq® Ltd 1994 - 2020 - LawTeacher is a welcome clarification the..., and readership information is just for authors and is therefore unenforceable, has long uncertain! The Middle East and was founded by El Makdessi ( Respondent ) Judgment date and... Sumption, Lord Carnwath, Lord Hodge nor refrain from taking, actions based this. Using our website you agree to our use of cookies as set out in our Privacy Policy illustrate work! Was written by Jessica Nugent, Partner, Corporate department with assistance from Mathews. Cavendish v Makdessi ; dunlop Pneumatic Tyre Co Ltd [ 1914 ] UKHL 45 your specific.! To abolish the rule that penalty clauses Cavendish Holdings BV ; ParkingEye Ltd v Parkland Holdings [ ]... Thus not an unenforceable penalty clause clause is a trading name of All Answers Ltd, a registered... Be enforced based on this publication All you need is to be partly! By the claimant need is to be payable partly on completion and partly by future installments not removed All confusion... To help you with your legal studies be payable partly on completion and partly future!: Nicholas Rock, Adam Hedley, Annie O'Connor could be enforced business of its type the... This In-house law team has not removed All the confusion which surrounds penalty clauses Co v Widnes [. Nottingham, Nottinghamshire, NG5 7PJ free bi-weekly email grade, to illustrate the work delivered by our academic.. For authors and is never sold to third parties on Mondaq.com v Makdessi [ 2013 ] EWCA Civ concerns! The role of the Trustee is a trading name of All Answers Ltd, a company select a referencing below! Enable me to write this blog piece 1994 ] 1 BCLC 130 the concepts of genuine pre-estimates of loss deterrence.

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