Practice and Procedure


PUBLISHED May 20, 2003

A counterclaim for damages for breach of a settlement agreement failed where the defendant had caused the breach due to its non-cooperation and could not prove an allegation of false representation.A claim for payment due under a contract between the claimant ('M') and the defendant ('C'). C sought to purchase an uninterruptible power system ('UPS') from M. The UPS was delivered to C and on 21 July 2000 an IBM engineer attended C's site on behalf of M to install the system. C stated that the engineer claimed that the UPS was not compatible with their system despite the fact that IBM's own configurator had recommended the UPS. There was a great deal of correspondence between M and C attempting to resolve the matter and install the UPS correctly. One e-mail sent by an employee of M to C attached an e-mail from IBM ('the IBM email') which stated that this UPS was compatible with C's system. However, it failed to include the full text of the IBM e-mail which included a suggestion that in some circumstances this UPS may not be compatible with C's system. M and C eventually came to a settlement agreement wherein M agreed to undertake certain obligations to settle the matter. C neither paid for the equipment, nor rejected it, nor purchased alternative equipment. M now claimed in debt for the sums owed of ?69,593.51. C counterclaimed for damages for breach of the settlement agreement, as M did not perform all its obligations under that agreement prior to liability accruing, and fraudulent misrepresentation on the part of M through its employee for failing to include the full text of the IBM e-mail.HELD: (1) The contract made in 2000 was for the sale of goods, not for the supply of materials and labour. There was an ancillary obligation on M to install the goods. Under M's terms and conditions M would in any event be entitled to payment for the goods which were delivered and about which no complaint was made. C did not reject the goods in 2000 or 2001. On the contrary they started to commission them and continued to demand that M install them. They did not purport to reject them until 31 January 2002 which was far too late. (2) The settlement agreement had been reached in September 2001 and C accepted further goods from M pursuant to that agreement. Accordingly it was not necessary to decide whether they had a right to reject before that date. (3) Payment of the invoice price had been long due. M were not giving up an accrued right to price under the settlement agreement. They were extending the time for payment of it. (4) M's terms and conditions applied to the settlement agreement. There was also an implied term that each party would cooperate with the other to secure performance of the contract. See Mackay v Dick (1881) 6 App Cas 251. (5) M had attempted to install the UPS on a number of occasions but C did not cooperate with M to enable M to perform its obligation under the agreement. C could not therefore complain of M being in breach. (6) There was insufficient evidence to enable judgment on whether the representation that the UPS system was suitable for C's system was false. No expert evidence was raised. C had failed to establish their case on falsity in relation to the suitability of the UPS. (7) The alternative allegation of false representation and deceit was made against M. Where a principal was to be made liable in deceit for misrepresentation made innocently by one agent, it must be established that there was another agent involved who had been dishonest. This was not proved and that was enough to defeat the claim. Even if C had made out this claim it could not be shown that C had suffered any damage as a result. (8) C's claim for damages for breach of the settlement agreement failed. M's claim for debt under the settlement agreement succeeded.Judgment accordingly.

[2003] EWHC 1076 (QB)