Case: Paal Wilson &amp; Co v Partenreederei Hannah Blumenthal [1983] 1 AC 854
Outcome: cited
A contract may be abandoned by agreement extinguishing all unperformed primary obligations. It may be abandoned by conduct where the conduct of one party acted on by the other leads to the inference of an implied agreement between them to abandon the contract. In the alternative, the conduct of one party towards another and the other's action upon that conduct to its detriment may result in the first party being estopped from denying that the contract has been abandoned Paal Wilson &amp; Co v Partenreederei Hannah Blumenthal [1983] 1 AC 854 at 914 (Lord Brandon), 915 (Lord Diplock), 924 (Lord Brightman). 172 In summary the word 'termination' when referring to the discharge of a contract has a variety of possible meanings. It may be limited to non-consensual termination by the action of one or other party to the contract. It may extend to discharge of the contract by effluxion of time. That is a consensual termination in the limited sense that it is part of the agreement from the outset. The word may also be construed as applying to a discharge of a contract by agreement or by abandonment which may be taken to amount to the same thing. Its meaning in cl 8.6 depends upon the language of that clause and related clauses of the Agreement. It is also to be construed by reference to the context of the Agreement as a whole. 173 Clause 8.1 of the Agreement concerned the circumstances in which Energy could terminate summarily Martech's services. None of those circumstances applied in this case. Clause 8.2 allowed Martech to terminate the Agreement in the event of Energy suspending payment or compounding with its creditors or assigning its estate for their benefit. That circumstance did not exist either. Clause 8.3 limited the power of both Energy and Martech to terminate for breach of obligation by requiring that the party in breach be served with a notice requiring rectification and allowing 30 days for that to occur. Clause 8.5 allowed Martech to 'terminate its services' on three months' written notice. 174 If the Board of Energy had resolved to dismiss Mr Brand as managing director other than for any of the reasons set out in cl 8.1 that could be taken as a repudiation of the Agreement and, if accepted by Martech, a termination of the Agreement giving rise to the entitlement to a payment under cl 8.6. If Energy declined to renew the term of the Agreement at its expiry, that too would give rise to an entitlement to the fee under cl 8.6. In each of these cases cl 8.6 had work to do. Each involved termination by Energy of its relationship with Martech. 175 The question arises whether by cl 8.6 Martech was entitled to a termination payment in the event of a discharge by agreement. Absent clear words, I do not construe cl 8.6 as extending to such a case. The bases and terms upon which parties to an agreement may agree to discharge it are many and various. The extension of cl 8.6 to mandate a very substantial payment in the event of an agreed discharge of the parties' contractual obligations would impose a requirement on the parties as to the terms on which they may so agree. Even if cl 8.6 expressly applied to a discharge by agreement, it would be open to the parties by agreement to discharge that obligation along with all the others. Indeed so to construe cl 8.6 is to give it, in its application to an agreed discharge, an operation rather like that of an agreement to agree. Such an agreement is not a contract. I accept in so saying that it may theoretically be possible to create an entitlement to a termination payment which vests, pursuant to the Agreement, upon the external event of a later agreement to discharge. I do not accept, however, that cl 8.6 so operated.