- March 21, 2013
- Posted by: Josiah Hincks Solicitors
- Category: Business Law Updates
An NHS Trust which tried to debit more than £80,000 from the remuneration of its private catering contractors in respect of a one-day-old chocolate mousse has nevertheless triumphed in a breach of contract claim. In finding that the contractors had not been entitled to terminate the agreement, the Court of Appeal ruled that a duty on the trust not to behave in an ‘arbitrary, capricious and irrational manner’ could not be implied into the detailed commercial contract.
The trust had been heavily criticised at first instance by a judge who said that it had ‘poisoned the relationship’ with the caterers who had a multi-million-pound contract to clean and supply meals at two hospitals. The contract was meant to last for seven years but collapsed in acrimony after 18 months after the trust complained about, inter alia, out of date food items, ‘unsatisfactory’ spoons, crumbs in a toaster and ‘fluff’ inside a notice board. The trust had at one point tried to make deductions of more than £700,000 from the contractors’ payments.
However, the Court of Appeal ruled that, although the trust had been in continuing breach of contract by awarding excessive numbers of ‘service failure points’ to the caterers in respect of minor breaches during the early stages of the contract, that had not entitled the caterers to walk away from the agreement.
The contract contained detailed provisions as to the circumstances in which the agreement could be validly terminated and, although the trust was obliged to co-operate with the caterers in good faith, a general duty not to act in an arbitrary, capricious or irrational way could not be implied into the agreement. The ruling means the trust can pursue its very substantial financial claims against the caterers in respect of its post-termination losses.