Schuler AG v Wickman Machine Tool Sales Ltd 2nd half PDF

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Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 Facts: 1. Suchuler, a German company, entered into a contract with Wickman, an English company, giving Wickman the sole rights to sell Suchuler's panel presses in England. 2. Suchuler alleged Wickman Tool’s failure of visiting 6 of the largest motor manufacturers in the UK for the purpose of soliciting orders for panel presses was a breach of “conditions” under the clause 7(b) of contract and claimed to be entitled to repudiate the contract, on the grounds that a single failure of fully implementing the legal obligation in clause 7(b) was a breach of condition, giving them an absolute right to terminate the contract; the contract was stated to last for 4.5 years in duration. 3. Clause 7(b) ‘It shall be a condition of this agreement that [Wickman] shall send its representatives to visit [the six largest UK car manufacturers of the time] at least once in every week for the purpose of soliciting orders for panel presses.’ 4. Clause 11 “either party could end the agreement if the other was in material breach and did not change its behaviour on 60 days' notice” 5. Mr Wickman failed to make any visits at the start; however this failure was waived by Schuler at first, but then when Wickman was making some improvements but not all the visits, Schuler terminated and noticed Wickman by letter. 6. Wickman sued, alleging for a wrongful termination of Schuler. Arguments for respondent(Wickman): 1. Though the word “condition” has its well established technical meaning, it has not always exclusively borne it; the definition for lawyer may be technical and specific, however in fact it has different meanings to a layman, eg. Meaning of stipulation. If a commercial contract which is to be performed by a layman, is intended to be set in its technical definition, such meaning must be made plain and clear by spelling out all the consequences of a beach of it; otherwise, the ordinarily popular meaning of mere a “stipulation” or a “term” should be in the way of interpretation. 2. The term of “condition” as stated in the clause 7(b) is merely a term but not a true condition of the contract, therefore Schuler cannot sue for termination of contract but merely damages.

3. Counter-argument for certainty: Certainty should be upheld undoubtedly in law but not necessarily to the same extent in relation to the meaning of words. 4. Counter-argument for subsequent actings: If a clause of a contract is ambiguous or uncertain, before deciding which of the alternative meanings should be adopted, the conduct of both parties during performing the contract should be considered in order to see the intention of both parties. Held, dismissing the appeal by Schuler. Judgements: 1. “Schuler maintains that the use of the word " condition " is in itself enough to establish this intention. No doubt some words used by lawyers do have a rigid inflexible meaning. But we must remember that we are seeking to discover intention as disclosed by the contract as a whole. Use of the word " condition " is an indication—even a strong indication—of such an intention but it is by no means conclusive.“ by Lord Reid. Clause 7(b) is not a condition but merely a term of contract due to its ambiguous meaning and the technical meaning should take second place to the intention of the parties who didn’t show a great intention of constructing the clause technically. 2. “The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear.”by Lord Reid. With specifying the consequences of breach of contract, it is unreasonable to adopt the technical meaning where there is an absence of intention. 3. “If I have to construe clause 7 standing by itself then I do find difficulty in reaching any other interpretation. But if clause 7 must be read with clause 11 the difficulty disappears. The word "condition" would make any breach of clause 7(b), however excusable, a material breach.” By Lord Reid. If (1) only the clause 7 is considered and (2) under the adaptation of the technical meaning, Schuler should be entitled to terminate the contract. However it is unreasonable if Schuler shall have right to terminate the contract for the grounds

that merely one single visit had been missed in accordance to clause 7b. Therefore, for the sense of reasonableness, clause 7b should have be read with clause 11 in considering whether the termination of the contract as a whole is reasonable, then the meaning of the word “remedy” would become important to the decision. 4. Reasoning by Lord Morris: Under clause 11, the innocent party shall terminate the contract if the other party “shall have committed a material breach of its obligation and shall have failed to remedy the same (failure) within 60 days of being required in writing so to do” That means, notice is needed to be given to Wickman for remedying the situation (failure of visit), and if notice and 60 days to change was not given, then clause 7 would not be breached. Only after 60 days without compliance would allow Schuler to terminate the contract. However, by the following reasons - (1) the failure to visit at first (that is prior to Jan 13, 1964) was waived by Schuler under a situation of having no proper notice to Wickman about the dissatisfaction and (2) that had been no proper notice under clause 11(a)(i) as Schuler in fact had already terminated the contract before noticing Wickman about its dissatisfaction and this means as a waive of that breach and (3) the word “remedy” should be meant to “make the way right in future”, therefore Wickman didn’t breach the clause 11 since he had already made some improvement which amounted to a remedy.

Ratio: 1. A term described as a “condition” in a commercial contract does not compel the court to hold that it is a condition in the strict sense and the question of intention will be decided by construing the contract as a whole. 2. In construing a contract, the court cannot take the conduct of the parties subsequent to the execution of the contract into account whilst making a decision or giving judgement....