The recent Court of Appeal decision in Advanced Multi-Technology for Medical Industry (trading as Hitex) and Others v. Uniserve[1] provides helpful guidance on: inducement and reliance on misrepresentations; the extent to which an innocent party of a wrongful termination (which is not accepted) is required to complete its contractual obligations thereafter; and notice of delivery in “ex works” contracts.
Background facts
This case concerned a contract between Hitex (a Jordanian manufacturer) and Uniserve (an English company) for the supply of 80 million personal protective equipment (PPE) masks from Hitex to Uniserve at the height of the COVID-19 pandemic. In advance of the contract, a representative of Hitex confirmed that it would have enough stock/production capabilities to meet Uniserve’s needs (the representation). However, Uniserve carried out independent diligence which established that Hitex’s production capabilities were not as described.
Nonetheless, Uniserve entered into the “ex works” contract with Hitex in April 2020.
The contract contained a delivery schedule for the masks. Time was of the essence for Hitex’s delivery of the masks but not for Uniserve’s collection of them. In practice, when “delivering” the masks, Hitex would inform Uniserve when the masks were available. Following initial supply failures by Hitex, the delivery schedule was revised, and thereafter Hitex made the masks available for Uniserve to collect in accordance with the revised delivery schedule. This remained the case until Uniserve purported to terminate the contract in June 2020 (the first termination), and Uniserve thereafter stopped collecting any of the produced masks.
Hitex did not accept the termination, but it did stop notifying Uniserve of each delivery and eventually stopped producing/maintaining sufficient masks at their Jordanian factory to meet the cumulative total of masks required under the revised schedule. After Hitex raised complaints about Uniserve’s failure to collect the masks in July 2020, Uniserve once again stated that the contract was finished (the second termination).
Hitex brought a claim against Uniserve for damages arising from nonacceptance of the masks. Uniserve’s defence included that it was entitled to rescind the contract on grounds of misrepresentation and/or terminate the contract for Hitex’s failure to comply with the revised delivery schedule.
The High Court’s decision
At first instance, the judge held:
- Uniserve did not rely on the representation and instead relied on its own due diligence. Therefore, Uniserve’s misrepresentation defence failed, and the first termination was a repudiatory breach.
- In failing to maintain production at a sufficient rate to meet the cumulative total of masks due under the revised delivery schedule, Hitex had not kept the contract alive but had, instead, accepted Uniserve’s repudiatory breach.
The judge’s finding that Hitex had accepted Uniserve’s repudiatory breach was highly controversial, as it was contrary to Hitex’s pleaded case that it had kept the contract alive.
Uniserve appealed.
The Court of Appeal’s decision
The Court of Appeal allowed Uniserve’s appeal. While Uniserve’s first termination was invalid, Uniserve was entitled to terminate on the grounds of Hitex’s subsequent failure to perform.
The court agreed with the judge at first instance that Uniserve did not take the representation on trust, given it chose to carry out its own due diligence. This was a set of facts strong enough to rebut the evidential presumption that a fraudulent statement intended to induce someone into a contract did induce that person into a contract. Accordingly, Uniserve was not entitled to rescind the contract for misrepresentation, and its attempt to do so was a repudiation of the contract.
Contrary to the conclusion of the High Court, the Court of Appeal found that Hitex had not accepted Uniserve’s repudiation, and the contract therefore remained alive. As a result, Hitex’s obligations to perform in accordance with its terms remained in force. The Court of Appeal found that Hitex’s failure to meet the cumulative delivery totals under the revised schedule and its failure to notify Uniserve that deliveries were available for collection were breaches of the contract. On this basis, Uniserve was entitled to – and did – validly terminate.
In respect of Hitex’s failure to notify Uniserve that deliveries were available for collection, the Court of Appeal explained that the duty to do so in “ex works” contracts “must depend on the terms of the contract and all circumstances of the case”. This is contrary to literature which suggests that sellers do always have an obligation to give notice to buyers. In this case, Hitex’s history of giving notice (particularly given its supply difficulties) was sufficient for this to be a requirement.
As Uniserve’s second termination was valid, Hitex’s claim for damages for nonacceptance fell away.
As to the High Court judge’s finding that Hitex had accepted Uniserve’s repudiation, the Court of Appeal stated that a judge cannot decide a case on grounds not argued. A judge is allowed to suggest points that the parties have missed but only if there is a fair opportunity for the parties to deal with it without disrupting a trial. This was not the case here, where the acceptance point was raised for the first time in the judgment. The Court of Appeal noted that if parties identify that a judge has made such an error, it would be legitimate and helpful for this to be pointed out before a judgment is handed down, so that the judge can have an opportunity to reconsider the judgment.
Key takeaways
For those engaged in negotiating a contract, do not think that you can pocket a misrepresentation to potentially act on later if you have grounds for believing that the representation is false. Carrying out any investigations that turn up grounds for disbelieving the representation will almost always be fatal to any subsequent claim in this regard.
As ever, in any contract, specify the precise nature of the parties’ obligations. In ex works contracts, be specific regarding the notification requirements of the seller and when delivery is deemed to have taken place.
For parties faced with a repudiation, there is a stark choice: Accept the repudiation and bring the contract to an end, or affirm the contract and continue to perform. If you go with the latter option, it is vital you must stick to that – there is no way back from affirmation once it has been made, and any failure to perform on your part will be a breach of contract regardless of prior repudiation.
For those involved in litigation, the clear takeaway here is the importance of considering an alternative case: A party never wants to be told by a judge how its unsuccessful case could have been successful if only it had been argued differently. While this case would have been difficult to plead in the alternative, it would not have been impossible.
[1] [2025] EWCA Civ 1212.
Contributors
Alicia Johnson-Cole