[Home][Databases][WorldLaw][MultidatabaseSearch][Help][Feedback]

EnglandandWalesCourtofAppeal(CivilDivision)Decisions
Youarehere:BAILII>>Databases>>EnglandandWalesCourtofAppeal(CivilDivision)Decisions>>GlobeMotors,Inc&OrsvTRWLucasVarityElectricSteeringLtd&Anor[2016]EWCACiv396(20April2016)
URL:http://www.bailii.org/ew/cases/EWCA/Civ/2016/396.html
Citeas:[2016]EWCACiv396

[Newsearch][PrintableRTFversion][Help]
NeutralCitationNumber:[2016]EWCACiv396
CaseNo:A3/2015/0017

INTHECOURTOFAPPEAL(CIVILDIVISION)
ONAPPEALFROMTHEHIGHCOURTOFJUSTICE,QUEEN'SBENCHDIVISION
LONDONMERCANTILECOURT
HHJMackieQC
[2014]EWHC3718(Comm)
RoyalCourtsofJustice
Strand,London,WC2A2LL
20/04/2016

Before:
LORDJUSTICEMOOREBICK,VICEPRESIDENTOFTHECOURTOFAPPEALCIVILDIVISION
LORDJUSTICEBEATSON
and
LORDJUSTICEUNDERHILL
____________________
Between:

(1)GlobeMotors,Inc(acorporationincorporatedinDelaware,USA)
(2)GlobeMotorsPortugalMaterialElectricoParaAIndustriaAutomovelLDA
(3)SafranUSAInc
and
TRWLucasVarityElectricSteeringLimited
and
TRWLimited
____________________
PaulDownesQCandEmilySaunderson(instructedbyWraggeLawrenceGraham&CoLLP)fortheFirstDefendant/Appellant
PaulLowensteinQCandRajeshPillai(instructedbyBaker&McKenzieLLP)fortheClaimants/Respondents
Hearingdates:9and10February2016
____________________
HTMLVERSIONOFJUDGMENT
____________________
CrownCopyright
LordJusticeBeatson:
I.Overview

Claimants/Respondents
FirstDefendant/Appellant
SecondDefendant

1.ThisisanappealagainsttheorderofHHJMackieQCdated11November2014followinga32daytrialbetweenMarchandJune2014intheLondonMercantileCourt.Theappellant,TRWLucasVarityElectricSteeringLtd("TRW
Lucas")produceselectricpowerassistedsteering("EPAS")systemswhichsensedrivers'inputtothesteeringwheelandprovidethenecessarysteeringassistancebydeliveringpowertothesteeringcolumnthroughagearbox.Thefirst
respondent,GlobeMotorsInc.("Globe"),designsandmanufactureselectricmotorsandleadframeassemblieswhichareacomponentpartofavehicle'sEPASsystem.
2.Thedisputeconcernsanexclusivesupplyagreementdated1June2001("theAgreement").UndertheAgreementTRWLucasagreedtopurchasefromGlobeallitsrequirementsofcertainelectricmotorsandleadframeassemblies
identifiedorcoveredbyit("theProducts").GlobeagreedtosellTRWLucasallsuchquantitiesoftheProductsasTRWLucasorderedfromtimetotimeandnottosellspecifiedpartnumberstoathirdparty.Thequantitiessoldand
purchasedundertheAgreementweretodependupontherequirementsofTRWLucas'scustomers.TheAgreementwasofalongtermnature,anditwascommongroundthatinthecarcomponentsindustrytherewereregularly
improvementstoanddevelopmentofproducts.
3.Inafullandcarefullyconsideredjudgment([2014]EWHC3718(Comm)),HHJMackieQCfoundthatTRWLucaswasinbreachoftheAgreementfromabout2005bypurchasingmotors(knownas"Gen2"motors)fromDEASEmerson
("Emerson"),afirmwhichTRWLucasboughtin2006.ThejudgegaveTRWLucaspermissiontoappealagainsthisorderonsixgroundswhicharesummarisedat[53]below.ThejudgesubsequentlyassessedGlobe'sdamagesinthesum
of10,095,095([2015]EWHC553(Comm))butrefusedanapplicationbyTRWLucasforpermissiontoappealagainstthedamagesorder.Thisappealissolelyconcernedwithliability.AttheendofthehearingweadjournedTRW
Lucas'srenewalofitsapplicationforpermissiontoappealagainstquantumpendingourdecisiononliability.
4.ThefactualbackgroundismorefullysummarisedinsectionIIIofthisjudgment.Forpresentpurposesitsufficestostatethatforanumberofyears,Globesuppliedproducts(knownas"Gen1"motors)toTRWLucas.TheAgreement
concernedthree"platforms"forrespectively,NissanB/RenaultP1,FiatC192,andRenaultP2.TheseproceedingsonlyconcerntheRenaultP1platform,forwhichplatformitappearsthatTRWLucasdidnotgetanorderfromRenaultfora
Gen1motor.AlthoughitgotordersfortheplatformfromNissan,thenumberofmotorssuppliedwasbelowthenumberestimatedintheAgreement(see[16]below)sothataprovisionforTRWLucastopayGlobe'samortisedcapital
costs(see[18]below)wastriggered.ThebreachfoundbythejudgeconcernedthepurchasebyTRWLucasfromabout2005ofmotorsknownasGen2motorsfromEmerson.By2014TRWLucashadpurchasedover3millionGen2
motorsfromEmerson.
5.TheprincipalissueintheappealiswhetherthejudgeerredindecidingthattheAgreementcoverednotonlytheProductsidentifiedinitandthedetailedspecificationsagreed,butalsothemotorsboughtfromEmersontotheextentthat
they"couldandwouldhavebeenproducedbyGlobemaking'EngineeringChanges'toproductswithintheexclusivepurchaseagreement".Thedeterminationofthisoverarchingquestionisthesubjectofground1.Itinvolvedthejudge
decidinganumberofotherquestionsastowhichTRWLucasalsosubmitsthatheerred.Thosequestionsarethesubjectofgrounds2to5.
6.Therearetwootherrespondents.ThesecondrespondentisGlobeMotorsPortugalMaterialElectricoParaAIndustriaAutomovelLDA("Porto"),asubsidiaryofGlobeincorporatedforthesupplyofelectricmotorstoTRWLucasunder
theAgreement.ThejudgefoundthatPortobecameapartytotheAgreement.Thisfindingisthesubjectofground6,whichIsummariseat[53]below.ThethirdrespondentisSafranUSAInc.("Safran"),theassigneeoftherespective
rightsofGlobeandPortointhelitigation.
7.ThejudgedismissedaclaimbyGlobeinnegligentmisstatement.HealsodismissedaclaimbyGlobeagainstTRWLimited,TRWLucas'sparentcompany.Thereisnoappealagainsteitherdecision.
8.InsectionsIIVofthisjudgmentIsetoutandsummarisetheAgreement,thefacts,thejudgmentbelow,andthegroundsofappeal.SectionVIcontainsmydiscussionofthequestionsbeforethecourt.Forthereasonsgiveninsection
VI(b),at[75][85]below,Ihaveconcludedthatthejudgeerredinfindingthattheterm"Products"intheAgreementincludednotonlytheProductsidentifiedinitandthedetailedspecificationsagreed,butalsoGen2motorsboughtfrom
Emersontotheextentthatthosemotors"couldandwouldhavebeenproducedbyGlobemaking'EngineeringChanges'"toProductsthatwerewithintheAgreement.Accordingly,Iwouldallowtheappealonground1.Itisthereforenot
necessarytodecidetheremainderofthegrounds.Idealbrieflywithgrounds25at[89][94].Becauseground6involvesaquestionofprincipleonwhichtherearesubstantiallyinconsistentdecisionsofthiscourtandtherewasfull
argumentbeforeus,Iaddressitat[97][113].
II.TheAgreement
9.TheAgreementconsistsoftwo"Premises",sixArticlesheaded"PurchaseandSale","Price","WarrantyandQuality","EngineeringChanges","Term",and"Miscellaneous",andfourAppendices.Theprovisionsthatarematerialtothis
appealaresetoutbelowandothersaresummarised.ThejudgesetouttheentireAgreementat[29]ofhisjudgment.
10.ThepartiesagreedthatthetwopremisesoftheAgreementaretobeconstruedandconsideredasterms.Theyare:
"A.Buyer[TRWLucas]wantstopurchasefromSupplier[Globe]BrushlesselectricmotorandleadframeassemblyproducedinaccordancewiththespecificationsattachedasAppendixA("Products")tobeusedin
conjunctionwithEPSsystems.
B.SupplierwantstosellProductstoBuyer."
11.Exclusivity:Itisconvenienttostartwiththeprovisionsinwhichthepartiessetouttheexclusivity.ThatisprimarilyinArticle1.2whichprovidesthat:
"BuyerwillpurchasefromSupplierallofBuyer'srequirementsoftheProductsandSupplierwillselltoBuyerallsuchquantitiesofProductsasBuyer[may]orderfromtimetotimepursuanttothisAgreement."
ExclusivityisalsoaddressedinthelastsentenceofArticle1.1whichstates:
"Suppliershallnotsellthepartnumbersreferencedinthisagreementtoathirdparty".
12.TheProducts:Whatisencompassedwithintheterm"theProducts"istobeseenfromArticle1.1whichisheaded"Products",PremiseAandArticle4.Emphasisingthewordswhichformedthesubjectofsubmissionsintheseproceedings,
thefirsttwosentencesofArticle1.1state:
"TheProductsinclude,butarenotlimitedto,(i)motorsandleadframeassemblyfor38NmNissanB/RenaultP1.(ii)motorsandleadframeassemblyfor58NmFiatC192,and(iii)motorsandleadframeassemblyfor58Nm
RenaultP2.Thepartiesmayaddadditionalproductsbymutualagreement."
13.AlthoughPremiseA(setoutat[10]above)statedthattheProductsweretobemotorsproducedinaccordancewiththespecificationsattachedasAppendixA,therewereinfactnospecificationsattached.Theparties,however,agreedthe
detailedspecificationsthatareinaseriesofdocumentsdatedbetween11Septemberand27November2000.

14.EngineeringChanges:ThecrucialprovisioninthisappealisArticle4,whichprovides:
"4.1General:Buyerreservestherighttopropose,atanytime,changesintheSpecificationsorotherrequirementsrelatingtotheProducts(''EngineeringChanges").Supplierhastomutuallyagree.BuyerwilladviseSupplierof
allEngineeringChangesbygivingSupplierpriorwrittennotice.IfSupplierproposestomakeanEngineeringChange,SupplierwilladviseBuyerofsuchproposal.BeforemakingsuchproposedEngineeringChange,Supplier
mustobtainpriorwrittenapprovalfromBuyer.
4.2EffectsofChange:FollowingnoticeofanEngineeringChangebyBuyerorofaproposedEngineeringChangebySupplier,SupplierwilluseallreasonableeffortsincooperationwithBuyertominimizetheeffectsofsuch
ChangeandwillsubmittoBuyerassoonasreasonablypracticableawrittenstatementoftheanticipatedeffectsofsuchChangeonproductioncosts,deliveryschedules,andmattersrelatedthereto.
4.3Cost:BuyerwillreimburseSupplierforallreasonablecostsassociatedwitheachEngineeringChangemadebyBuyerwithinninety(90)daysfollowingitsreceiptofSupplier'sinvoiceforsuchcosts,whichsuchinvoice
willnotbeissuedpriortotheimplementationofsuchChange.SuchcostswillincludereasonablecostsrelatedtosurplusinventoryandobsoleteProducts,tooling,andequipment.BuyerandSupplierwillnegotiate,ingood
faith,theallocationofcostsassociatedwitheachEngineeringChangeproposedbySupplier."
15.Itiscommongroundthat,asthejudgeheld(seejudgment[225]),amotororassemblywhichevolvesthroughtheprocessinArt4isaProductwhichissubjecttotheAgreement.Themainissuebetweenthepartiesconcernschangesinthe
SpecificationsorotherrequirementsrelatingtotheProductswhichcanbeeffectedby"EngineeringChanges",asopposedtochangeswhichconstituteanewProduct.Inacasewheretheresultingmotororassemblycouldandwouldbeso
effected,doesitqualifyasoneofthe"Products"undertheAgreementevenwherethebuyer(TRWLucas)hasnot"proposed"thechangestothesupplier(Globe)?Underlyingthis,althoughnotformulatedassuchforreasonswhichIwill
explore,isthequestionwhetherArticle4obligesthebuyer(TRWLucas)to"propose"suchchangestothesupplier(Globe).
16.Quantities:ThesubheadingtoArticle1.2is"Volume".Aftertheexclusivepurchaseandsupplyobligations,whichIhavesetoutat[11]above,thesecondsentencestates:
"ThequantitieswilldependupontherequirementsofBuyer'scustomers(currentlyFiat,Nissan,Renault).Atpresent,Buyerestimatesthatitwillrequirethefollowing".
ThereisthenatablesettingouttheestimatedvolumesfortheProductsreferredtoinArticle1.1foryearsfromtheinceptionoftheAgreementuntil2011.Inthecaseofthe38NmNissanB/RenaultP1platform,withwhichthisappealis
concerned,theestimatesarefrom20022006andthevolumesare225k,475k,743k,1081k,and1081k.Itisstatedthat"varianceisestimatedat+/15%."Theseestimates,togetherwithArticle5aboutthetermoftheAgreement(see[19]
below),werereliedonbyGlobeandthejudgetoshowthelongtermnatureoftheAgreement.
17.OtherArticle1provisions:Articles1.31.7dealwithdelivery,invoices,deliverydatesandlocations,paymenttermsandarequirementthatGlobemaintainaconsignmentofinventory.Article1.8isheaded"ManufacturingLocation".It
provides:
"ThesupplierhascommittedtoproducetheproductsataEuropeanmanufacturinglocationassoonaspracticableanticipatedtobein2002."
18.PriceandamortisationofGlobe'scapitalcosts:Article2dealswith"Price".Forpresentpurposes,itisonlynecessarytosetoutArticle2.6concerning"Underrecoveryofsuppliedproducts".Itprovides:
"ThepartiesacknowledgeandagreethatSuppliershallrecoveritscostsoftoolingandcapitalbyamortizingsuchcostsovertheunitstobesoldoverthefirstfive(5)yearsofthisAgreement(''RecoveryPeriod").Duringthe
RecoveryPeriod,thevolumeofBuyer'spurchasesofeachProductshallbereviewedthefirstmonthofeachyearfollowingtheinitialyearoftheagreement.IntheeventthattheaggregatevolumeofBuyer'spurchasesofeach
ProductduringtheprecedingyearsislessthanthatwhichisprovidedinArticle1.2aboveandsuchvarianceisgreaterthanfifteenpercent(15%),thenSuppliershalladjustitspricingsoastoamortizetheremainderof
Supplier'stoolingandcapitalcostsovertheforecastedunitstobeproducedfortheremainderoftheRecoveryPeriod.If,attheendoftheRecoveryPeriod,Suppliershallnothavefullyrecovereditstoolingandcapitalcosts,
thenSuppliershallinvoiceBuyerfortheremainingportionofsuchcostsandSuppliershallpayonsuchinvoicewithinninety(90)daysfollowingitsreceiptofsuchinvoice."
19.Othermaterialterms:Article3isheaded"WarrantyandQuality"andArticle5"Term".Article5.1provides:
"TheTermofthisAgreementwillbeginontheEffectiveDateandshallcontinueforthelifetimeofeachoftheplatformsatarateof100%oftheplatformrequirementasestimatedinArticle1.2."
Articles5.2and5.3dealwithterminationoninsolvencyandmaterialbreach,andtherightsofeachpartyaftertermination.
20.Forpresentpurposes,theonlyprovisioninArticle6whichitisnecessarytosetoutisArticle6.3.Thisprovides:
"6.3EntireAgreementAmendment:ThisAgreement,whichincludestheAppendiceshereto,istheonlyagreementbetweenthePartiesrelatingtothesubjectmatterhereof.Itcanonlybeamendedbyawrittendocumentwhich
(i)specificallyreferstotheprovisionofthisAgreementtobeamendedand(ii)issignedbybothParties."
III.Thefacts
21.TRWLucashaddealingswithGlobeasamotordeveloperfromearly1996:judgment,[53].InMarch1999,theywereworkingtogethertodevelopmotorsforaFiatEPSsystemandtheRenaultP2platform:judgment,[54].Bytheendof
1999,TRWLucasbecameinvolvedindevelopingbusinesswithRenaultandNissan,whichwerestartingtodevelopacommonplatform:judgment,[58].InmidDecember1999TRWLucashadbeenchosenassupplierofEPASsystems
forthisplatform(judgment,[60]),andinJanuary2000TRWLucastoldGlobethatithadreceivedacontractfortheP1platformsfromRenault:judgment,[62].
22.Itappearsfromanemaildated15July2000thatwithinTRWLucasthestrategywastosplitvolumeontheP1partofthecommonplatformbetweenGlobeandEmerson,andthattheUnitedStatespartofTRWhaddecidedthatEmerson
shouldbethesupplierofmotorsforEPASsystems:judgment,[68].Notwithstandingthis,inaletterfromTRWLucasdated13September2000Globewasnominatedasthesupplierofthe"38NmmotorvariantoftheNissan/RenaultP1
platforms"subjecttotermsandconditionsassetoutinapreferredsupplieragreement:judgment,[75].
23.Itappearsthatasaresultofnoticeintheautumnof2000ofprojectedpriceincreasesfortheGen1motor,RenaultaskedTRWtoconsideralternativedesignapproachestoreducecost,andthattheimpetusforaGen2motorwasconnected
withthat:seememodated7May2001fromTRWChassisSystems.On10October2000theGen2programmewaslaunchedinternallywithinTRWLucas:judgment,[85].On26March2001TRWLucassentGlobeadraftsupplier
agreementwhichhadbeendiscussedbetweentheparties.TheproductsatArticle1.2ofthedraftagreementincludedthesameproductsaswereincludedintheagreementsubsequentlyenteredinto,inparticularthemotorsandassemblies

forthe38NmNissan/RenaultP1:judgment,[103].Furtherdraftsofagreementswerecirculatedon30Marchand24April2001:judgment,[105].TRWLucaswasconcernedthatGlobewasunwillingtocommittoitsnewplantinPortugal
untilithadconcludedacontract:judgment,[112].
24.InMay2001,GlobesentTRWLucasfurtherquotesfortheplatforms.ThesequoteswerehigherthanquotesgiveninOctober2000,andthisgaverisetowhatthejudgedescribedas"consternation"atTRWLucas:judgment,[107][108].
Afterfurthercorrespondence,thefinalpriceswerereviseddownwardandrates,whichwerethoselatercontainedintheAgreement,wereagreed:judgment,[112].
25.IhavestatedthattheAgreementbetweenTRWLucasandGlobeisdated1June2001.Fromthetimeitwasenteredinto,theUnitedStatespartofTRWLucaswasconcernedthatthecompanymightbelockedintotakingalloftheGen2
motorsfromGlobe:judgment,[113].Inlate2001,TRWLucasbegantoconsiderwhat,inthelightofitsobligationunderArticle2.6oftheAgreement,thecostwouldbetoitiftheAgreementendedbeforelong:judgment,[122].In
October2001,itwasestimatedthatTRWLucashadapotentialliabilitytoGlobeof$21million:judgment,[122].
26.On10April2002TRWLucasemailedGlobearequestforaquotationforan"updatedGenII38/47NmSpec"bytheendof"nextweek",19thApril2002.Itstatedthat"duetocostreasonsweneedtohaveaGen2systemwhichhastobe
cheaperwithsameorevenbetterperformance"andthat"youfindattachedtheSpecsforthenewGen2motor":judgment,[129].Thecompletespecificationsfora38NmmotorinGen2wereneversenttoGlobe:judgment,[130].On11
April2002,TRWLucasinformedGlobethatitexpectedGlobetogiveindicativepricingandcostindicationsforGen2atameetingwhichwasscheduledfor19April2002:judgment,[133].Globerespondedthatthisshorttimelimitwas
"ridiculousaswellasunfair".
27.AtapresentationtoRenaulton13May2002,TRWLucassetoutthedifferencesbetweenGen1andGen2.Themotorsweredescribedas"nochangesamefundamentalmotortechnology".Thejudgeattachedimportancetothis:judgment,
[290],andseealso[136].HeidentifiedthemaindifferencesbetweenGen1andGen2asrespectively,skewed(Gen1)andsegmented(Gen2)stators,thehighresolutionencoderonGen2,andlowerinductancevaluesinGen1:judgment
[298][322].ItwascommongroundthattheGen2motorwasnotoneoftheProductsidentifiedintheAgreementandthedetailedspecifications.AsIhavestated,thecoreofthedisputeconcernswhethertheAgreementandits
exclusivityappliednotonlytotheProductsidentifiedinitbutalsotoproductsthat"couldandwouldhavebeenproducedbyGlobemaking'EngineeringChanges'totheProductsidentifiedintheAgreementandthedetailedspecification".
28.GlobeprovidedaGen2quoteon24May2002:judgment,[137].Atsomelaterstage,GlobewasinformedthatTRWLucaswaswillingtoletitrequotefortheGen2:judgment,[139].Noquotewasreceiveduntil9July2002,whena
basicquotewassentafterTRWLucaschasedGlobeinanemaildated5July2002:judgment,[143].Itappearsfromnotesofatelephoneconversation(judgment,[148])thaton15July2002Renaultwasstillundecidedastowhetherit
wantedaGen1oraGen2EPASsystemforitspartofthecommonplatform.
29.EmersonwasinformedbyTRWLucason26August2002thattheGen2projectwouldbeawardedtoitonceitreceivedthenominationfromRenault.ItappearsthatthereafterGlobewasincontemplationonlyasasecondsource.When
GlobewroteinDecember2002askingwhetheritshouldcontinuethequotationprocessforGen2,TRWLucasdidnotreply:judgment,[164].AttheendofJanuary2003,GlobewasstillpressingforuptodatespecificationsfortheGen2
motor:judgment,[166].NoGen2specificationsotherthanthoseprovidedinApril2002(see[26])wereshowntoGlobeuntilaftertheseproceedingswerecommenced:judgment,[273].
30.On23February2003,TRWLucasawardedtheGen2businesstoEmerson.ItstatedthatEmersonwouldbeappointedasthesoleheadsupplierforthedevelopment,andthatthestartofproductionwasNovember2004.InNovember2003,
TRWLucasissuedarevisedversionoftheGen2motorspecificationbutdidnotissueittoGlobe.Theseproceedingswerefiledon1June2011.
IV.Thejudgment
31.Thejudgesetoutthe24issuesidentifiedbythepartiesandaddressedthemsystematicallyinhisjudgmentwhichranto548paragraphs.Beforedoingso,hegaveasimplifiedoutlineofthedisputes,setouttheAgreementinfull,dealt
(judgment,[30]50])withthetechnicalbackground,platforms,modelsandmotorsand,(at[51][177]),setoutthebackgroundfacts.
32.Thefirstfourissuesareconstructionissuesanditisprimarilywiththoseandtheconsequencesofthejudge'sdecisionsonthosethatthisappealisconcerned.Itisalsonecessarytosummarisethejudge'sconclusionsonthefactualdisputes
(issues59).Issue12waswhetherTRWLucaswasinbreachoftheAgreementbypurchasingtheEmersonGen2,andissue17waswhetherPortohadarightofactionundertheAgreement.
33.Thejudgestatedthattheapproachtoconstructionwasnotindispute.Inpartbecauseoftheclaiminnegligentmisrepresentation,therewasmuchevidenceofthedealingsbetweenGlobeandTRWLucasintheperiodbeforethe
Agreement.Therewasthusmaterialbeforethejudgewhichwasnotrelevantoradmissibleinconstruingthecontractbuthewas(see[186][187],and[256])alivetothis.OneofTRWLucas'scriticismsofthejudgmentisthatthejudge
wastooalivetothisandwronglyexcludedmaterialwhichdidnotoffendtheexclusionaryruleastoprecontractualnegotiations,andthesummaryofthefactsaboveincludestherelevantpartsofthatmaterial.
(a)Issues13:Themeaningof"Products"and"EngineeringChanges"
34.Althoughnotformulatedinthiswayinthelistofissues,thefirstofthequestionsofconstruction(issue1)wasthemeaningoftheterm"EngineeringChanges".Thejudgeheld(judgment,[204])thatthisisnotatechnicalterm.Itdoesnot
haveasingleuniversalmeaninginthemotorindustrybutisaconceptofrelativelycleargeneralmeaning.Hecontrastedanalterationwhichisachangetothespecificationandnomorewithonewhichcreatesanewproductandstated
(judgment,[206])that"theboundarybetweenengineeringchangeandnewproductisaquestionoffactanddegree".Heconcluded(see[49][50]below)thatthechangesthatGlobeclaimeditcouldandwouldhavemadetotheGen1
motorandleadframeassembliestomanufactureitsownGen2motorandleadframeassemblieswere"EngineeringChanges":judgment,[369][371].HealsoconcludedthatGlobewouldhavemadethechangeswithinatimescale
acceptabletoTRWLucasandRenault:judgment,[381].
35.Issue2,thesecondquestionofconstruction,waswhethertheterm"Product"intheAgreementincludedmotorsrequiredforacontractuallyspecifiedplatform(inthiscasetheRenaultP1platform)whichGlobe"couldandwould"have
producedbymaking"EngineeringChanges"totheproductswhichitwassupplyingtoTRWLucasundertheAgreement.Thejudgestated(judgment,[224])thattheAgreementwasintendedtoregulatedealingsbetweensophisticatedand
substantialpartiesoveralengthyperiodandtocaterforinevitabletechnicalchangesastheproductwasdevelopedinanindustrywhereproductdevelopmentwascollaborative.Heregardedthedefinitionof"Products"tobeprimarilythat
atPremiseAandrecognisedthatwhereacontracthasflawsthereisaneedforsomecautioninattributingparticularsignificancetoeverywordandphrase:judgment,[225].He,however,emphasisedthatArticle1.1statesthat"Products"
arenottobelimitedtothethreeplatformsspecifiedintheAgreementandstatedthat"thespecificationsintheAgreementareonlythestartingpoint".
36.Afterstatingthatthepartiescanadd"additionalProducts"bymutualconsent,thejudgecontinued:
"IseenoreasonwhyamotorwhichevolvesfromaGen1throughtheprocessinArticle4isnotassubjecttotheAgreementasanyothergiventhewordingoftheAgreementanditslongtermandexclusivenatureinanareaof
industrywhereregularimprovementanddevelopmentisobviouslyexpected.ThisisnotanagreementjustfortheProductsinexistenceattheoutset.TherewillbechangesandthesewillbegiveneffecttobyArticle4ifthey
fallwithinitstermsorotherwisebyagreement,ifthatbeforthcoming.IdonotseethisapproachasrequiringanyimplicationoftermsordoingviolencetothelanguageoftheAgreement.NeitherdoIseeitassufficiently
uncleartowarrantinvestigationofwhethertheapproachproducesresultsthatareveryunreasonableorwhichfloutbusinesscommonsense."(judgment,[225])

37.AstomotorswhichGlobe"couldandwould"haveproducedbymaking"EngineeringChanges",thejudgeconcludedthattheywere"Products"withintheAgreementalthoughthewordsarenotintheAgreement.Hethenstated(at[226])
thatreasonswhyalongtermexclusiveagreementmightbecommerciallyunattractivetoTRWLucaswerenotreasonswhytheAgreementshouldnotbeinterpretedinthisway,andthathisconstructioncouldequallyhaveadvantagesfor
TRWLucas.
38.Issue3waswhether"Products"fortheRenaultP1platformwerelimitedtoa38NmEPASsystem.Inviewofthelapseoftimeanddifferingrecollections,thejudgeplacedlittlerelianceontheevidenceofwitnessesandconsideredthat
documentspredatingtheAgreementbymanymonthsdidnotassist:judgment,[254][255].ReferringtoPrennvSimmonds[1971]1WLR1381,hestated(judgment,[256])thatevidenceofwhatthepartiesstatedinprecontractual
discussionswasinadmissibleunlessitwasofthefactualbackgroundknowntothematthetimeoforbeforethecontract.
39.Thejudgeconcluded(judgment,[254][257])that,despitetheexplicitreferenceto38Nm,forthreereasons,the"Products"fortheRenaultP1platformwerenotlimitedtoa38NmEPASsystem.First,thereferenceto"38Nm"was"not
partofthedefinitionofproductsbutofwhatthatdescriptionnonexhaustivelyincluded".Secondly,38Nmreferredtothetorqueofthesystem,notofthemotors,anditcouldchangeasaresultofanimprovementinthesystemunrelatedto
themotor.ItwouldhavebeenoddtolimitthemotorsinthislongtermagreementsoaseffectivelytoterminateitinthecaseofsuchachangeoronedeliberatelymadetofrustrateGlobe.Thirdly,anumberofprovisionsintheAgreement,
includingthebroaddefinitionof"Products"capableofpermittingchangesoverthelifeofaplatformandthereferencestotheRenaultP1platform,wouldservenopurposeiftheAgreementwaslimitedto38Nmmotors.
(b)Issue4:WasGlobeobligedtoimplementproposedEngineeringChanges,andwasTRWLucasobligedtoaskGlobetoimplementEngineeringChangestoaProduct?
40.ItistobeobservedthattheultimatequestionfordecisionwasnotwhetherGlobewasobligedtoimplement"EngineeringChanges"toaproductinfactproposedbyTRWLucasunderArticle4.1,butwhetherTRWLucaswasobligedto
propose"EngineeringChanges"toaproducttoGlobeorwhetherconsequencesfollowedifitdidnotsopropose.Althoughnotexplicitlyidentifiedinthesetermsasoneoftheconstructionissues,thisinsubstanceisthequestionraisedby
issue2.Thejudgeconcluded(judgment,[206])that"[i]ftheproposedalterationisachangetothespecificationandnomoretheBuyermustofferandcanimposeitontheSeller",i.e.TRWLucaswasobligedtoproposeittoGlobe.
41.Astoissue4,thejudgereiteratedthereasonshehadgivenwhenrefusingtostrikeoutaspectsofthecaseinOctober2012:see[2012]EWHC3134(QB).HeconcludedthatGlobewasobligedtoimplement"EngineeringChanges"
proposedbyTRWLucas:judgment,[258][259]and[270].HerejectedTRWLucas'sargumentthatArticle4.1,withits"righttopropose",involvesaconsensualprocessandwastheonlywaytheclausecouldworkinpracticeandthat
therewereinsufficientobjectivecriteriafortheretobeanenforceablecontractwiththegapsfilledbyusingtheconceptofobjectivereasonableness:judgment,[264],[266][268].Inhisstrikeoutdecisionhehadstatedthatalthoughthe
words"tomutuallyagree"inArticle4.1were"poorlychosenandambiguous",whenreadinthecontextofalongtermagreementwhere"thevolumeestimatesextendto11yearsoverallandtosixyearsontheplatformindispute",they
"connoteobligation,notmerelyanopportunitytodiscuss".Healsostated(judgment,[270])that"theobligationisclear",that"theexistenceofanenforceableobligationisconsistentwithadutytocollaborate",and,whilethecourtcannot
compelcollaboration,itcandealwiththesituationwhichariseswhencollaborationbreaksdown.
(c)Issues56:DifferencesbetweentheGen1andGen2motors
42.Issues59concernedthefactualdisputesabouttheGen1andGen2motors.ThejudgeconsideredthatGlobe'sexpert,DrSidman,lackedthedetaileddirectexperienceoftheissuespossessedbyTRWLucas'sexpert,ProfessorAckva
(judgment,[286][287])andthathisoralevidencewasveryunsatisfactoryandnotreliable.HedescribedProfessorAckva(judgment,[288])asanadmirableexpertwitnesswhotosomeextentactedasasinglejointexpert.
43.Thejudge'sconclusionsonthethreemaindifferencesbetweenGen2andGen1heidentified(see[27]above)wereasfollows.Thechoiceofstatorwas,despiteTRWLucas'spreference,notcriticalorallthatimportant:judgment,[303].
Therewas(judgment,[308])nosignthatthepresenceorabsenceofahighresolutionencoderwasofconcerntoRenault.ItwascommongroundthattheGlobeGen2motorwouldnotmeetTRWLucas'sinductanceparameters
specificationandwouldbelowerthantheEmersonGen2.Thejudgeconcludedthatoverallahigherlevelofinductancewasmoredesirable.Therewas,however,(judgment,[311])noevidencethatRenaultitselfspecifiedrequirements
relatingtoinductanceanditwasunclearhowcriticalthespecifiedparameterswere.Hadtheissuearisen,"thepartieswouldhaveresolveditwithoutdifficulty,asindeedTRWandEmersonappearedtohavedoneontherealGen2":
judgment,[322].
44.Afterdealingwithendoflinetestingandthesignificanceofthefactthat,inthatprocess,specificationsareamendedorrelaxed,thejudgeconcludedthat,inmakingacomparisonbetweenmotors,regardhadtobehadtosuchtestingas
wellastheoriginalspecifications:judgment,[326].
(d)Issues79:WerethechangesGlobestatedtheycouldandwouldmaketoproduceaGen2motor"EngineeringChanges",withinwhattimeframewouldGlobehavemadethosechanges,andwouldtheGlobeGen2havebeenadirect
substitutefortheEmersonGen2motor?
45.Ihavestatedthatthejudgeconsidered(judgment,[331])thatthebestguideinassessingwhetherGlobe"couldandwould"buildadirectsubstituteforEmerson'sGen2isafunctionalapproachtothespecificationsoftheGen1andthe
EmersonGen2motors.HedescribedthedeterminationofwhetherGlobecouldshowonbalancethatitwouldhavereceivedthebusinesstobeahypotheticalandimperfectexercisebut(judgment,[331])consideredthistobethebest
guideforthecourtintheabsenceofotherevidencetoexplainwhatRenault'sactualrequirementswere.Thefunctionalspecificationwas(judgment,[273])takenfromacombinationofthewrittenspecificationsfromTRWLucaswhich
Globehadassembled.
46.ThejudgerecognisedthatTRWLucaswasentitledtoperformthecontractintheleastburdensomewayitcouldwithinitscontractualobligations.Heconcluded:
"[E]venminimalcompliancebyTRWwouldhavebeenlikelytoproduceanacceptableresult.TRWwantedRenault'sbusinessandhadacontractualobligationtosourcethemotorthroughGlobe.TRWhadinthepastworked
wellwithGlobeand,itwasclearfromtheevidenceinthiscase,wouldhavewillinglyworkedwithitagainifrequiredtodoso."(judgment,[349])
Healsostated:
"TRWhadtherighttoimposeitsownrequirementsforthemotorsuponGlobe.TheagreementdoesnotpermitGlobesimplytobuildwhatitlikesaslongasitmeetstherequirementsthatRenaultcanbepersuadedtoaccept.A
consequenceofTRWenteringintotheAgreement,however,isitscommitmenttobuyandGlobe'sobligationtosellproducts.Alinehastobedrawnsomewhere,butnotinthiscase,betweentwoconsiderations.First,thereare
TRW'slegitimatedetailedrequirements,includingnodoubttechnicalchangeswhichmightbeseenasnotessentialbutdesirableasthewayforwardtofutureimprovements.Secondly,therearechangeswhichGlobecouldnot
accommodateatreasonablecostoratallwiththeresultthatitwasnotabletoobtainitsrightstosupplyundertheagreementorcouldnotbecompelledtosupplyaProductwhichwascommerciallyunattractivetoit."
(judgment,[352])
47.Thejudge'sassumption(judgment,[350])wasthatTRWLucasandGlobewouldhaveconductedthemselvescollaborativelyinworkingonaGen2motor,whilerecognising(judgment,[351]and[355])thatTRWhadlegitimate
requirementsconcerningreliability,safety,abilitytodeliverontimeandcostbeyondthoseidentifiedasfunctionaland(judgment,[349])thatitwasentitledtoperformthecontractintheleastburdensomewayitcouldconsistentwithits

legalobligations.WhatMrDownescharacterisedastheinferentialapplicationofahypotheticalcounterfactualassumptionthatTRWLucashadadutytocooperatewithGlobeindevelopingtheGen2motorisoneofthegroundsof
appeal.
48.Theword"requirements"didnot(seejudgment,[354])permitTRWLucastoimposewhatitwantedregardlessoftherealneedsofRenaultandthecapacityofGlobe,withwhichithadchosentocontract.Thejudgestatedthatthe
importantrequirementswouldhavebeenthosethenimposedbyRenault,plusthoseofTRWLucas,andthatinrealitythemotorwouldhaveevolveddownTRWLucas/Globe,notTRWLucas/Emerson,tramlines.
49.InhisassessmentofwhetherthechangesGlobecouldandwouldhavemadetotheGen1motorandleadframeassembliesconstituted"EngineeringChanges",thejudgestatedthatMrArwine,Globe'sVicePresident(Engineering),"didnot
pretendthathisGen2wasadirectsubstituteforEmersonGen2oreventhatGlobewouldbeabletoreproducetheEmersonproduct":judgment,[371].HestatedthathedidnothavetoevaluateMrArwine'sclaimthathewasover95%
certainwhatGlobecoulddobeyondconcludingthatitwasover50%moreprobablethannotthatitwouldmakefeasibleandworkableengineeringchanges.Healsostated(judgment,[387])thatalthoughtheGlobeGen2wouldnotmeet
therelevantspecificationsoftheDEASGen2,it"wouldbeadirectsubstitute".Itappearsthatheconsidered(a)thisconclusionfollowedfromhisfunctionalapproach(b)theGlobeGen2wouldhavemetRenault'srequirementforthe
Gen2EPASsystemand(c)TRWLucas'sfocusonthedetailedevidenceastothespecificationsobscured"thefundamentalpointthatthesetwocompaniescouldandwouldhaveworkedtogethertoproduceasuitableGen2motor".
50.Iturntotheconclusionsabouttheprocessofmaking"EngineeringChanges".Thejudge(judgment,[369][371])consideredthisprocesscanbelessformalandmoreflexiblethanTRWLucas'sexpertsuggested.HeacceptedMrArwine's
evidencethatGlobecouldreadilyhavemadeaseriesofsimultaneousengineeringchangestootherproductssoastoproducetheGlobeGen2motors,andrejectedthesubmissionthatthatevidencewasinadmissibleopinionevidence.He
statedthatinmosttechnicaldisputes,factualwitnessesfamiliarwiththesubjectgiveopinionevidence,opinionandfactevidenceoverlap,andthepointshouldhavebeentakenearlierifitwastobetaken:seejudgment,[370].His
conclusionwasthatthechangesGlobeallegeditcouldandwouldhavemadetotheGen1motorandleadframeassembliestomanufactureitsownGen2productconstituted"EngineeringChanges"underArticle4.1oftheAgreement.He
alsoconcluded(judgment,[381])thatGlobecouldandwouldhaveimplementedthosechangeswithinatimescaleacceptabletoTRWLucasandRenault.
(e)Issue17:DidPortohavearightofactionagainstTRWLucasundertheAgreement?
51.ThejudgerejectedthesubmissionthathewasboundbytheCourtofAppeal'sunreporteddecisioninUnitedBankLtdvAsif(11February2000)todecidethattheeffectofArticle6.3wasthattheAgreementcouldonlybeamendedbya
writtendocumentwhichspecificallyreferredtoitsprovisionsandwassignedbybothparties.HestatedthatUnitedBankvAsifwasnottreatedasbindingbyalaterCourtofAppealinWorldOnlineTelecomvIWayLtd[2002]EWCACiv
413.AfterreferringtotwofirstinstancedecisionswhichIconsiderat[105]belowwheretheWorldOnlineTelecomapproachwasaccepted,hedecidedthatthebetterviewisthatitispossibleforpartiestoagreetovaryorwaivea
requirementsuchasthatinArticle6.3,whethertheyhavedonesoisfactsensitive,andtodecideotherwisewouldbeinconsistentwiththeprinciplesoffreedomofcontract.
52.ThejudgefoundthattheAgreement,includingArticle6.3,wasinfactvariedorwaivedbytheparties'conductbecauseintheirdealingsundertheAgreementoveralongperiodtheyoperatedasifPortowasaparty:judgment,[468]
[489].Hesummarisedbothparties'casesandtheevidence(judgment,[472][476]),recognisedtheambiguitiesinsomeofthedocuments(judgment,[475])butconcluded(judgment,[477])thatitwas"overwhelminglyclear"onthefacts
andmaterialdeployedbyGlobethatTRWLucastreatedPortoasacontractingparty.Inreachinghisconclusion,hetookintoaccount:(a)Globe'srelianceonTRWLucasandTRWLimited(ortheirnominees)orderingproductsfromPorto
undertheAgreementinaccordancewiththecontractualspecificationsandpricesfrom8January2003(b)thesupplyandinvoicingofthoseproductstoTRWLucasandTRWLimited(ortheirnominees)byPortoinaccordancewiththe
contractualspecificationsandprices(c)thesubmissionbyTRWLucasandTRWLimitedofwarrantyclaimsundertheAgreementtoPortoratherthantoGlobeand(d)TRWLucas'scontinuedsubmissiontoPortoofitsvolumeforecasts
oftheproductsundertheAgreement:judgment,[473].
V.Thegroundsofappeal
53.ThejudgegaveTRWLucaspermissiontoappealagainsthisordermadeon11November2014onsixgrounds:
(1)Ground1:Erroneousextendeddefinitionof"Products":ThejudgeerredinconstruingtheAgreementasincludingwithinthedefinitionof"Products":"motorsandleadframeassembliesbuilttodifferentspecifications
fromtheGlobeGen1specification,where[TRWLucas]requiredthosemotorsandleadframeassembliesfortheplatformsidentifiedintheAgreement"wheretwoconditionsweresatisfied.Thefirstwasthat"thosemotors
werecomprisedofmotorsandleadframeassembliesinitiallyproducedby[Globe]butwithchangestotheirspecificationsorotherrequirements".ThesecondwasthatGlobe"couldandwouldhaveproducedthosemotorsand
leadframeassembliesbymakingEngineeringChangestothemotorsandleadframeassembliesthatitinitiallysuppliedto[TRWLucas]undertheAgreement,underArticle4.1":Issue2.Issues10and12arealsorelevanttothe
determinationofthisground.
(2)Ground2:"38Nm"EPASsystem:Thejudgeerredindecidingthatthephrase"38Nm"usedinArticles1.1and1.2oftheAgreementdidnotlimitthescopeofthemotorstobecoveredbytheAgreementtothosewhich
weretobeusedinapowersteeringsystemofthatratingsofarastheRenaultP1platformwasconcerned:Issue3.
(3)Ground3:"EngineeringChanges":Asformulated,thisisthatthejudgeerredinfindingthattheGlobeGen2powersteeringsystemcouldbederivedfromtheGlobeGen1systembymakingonly"Engineering
Changes"tothelatter:Issue7.ItwasarguedthatthejudgehadfailedtoresolvethecorrectissuebuthaddecidedwhetherGlobewascapableofimplementingthechangesnecessarytoderivetheGlobeGen2fromtheGlobe
Gen1.
(4)Ground4:"Directsubstitute":ThejudgeerredinfindingthatthemotorsfortheGlobeGen2powersteeringsystemwereorwouldbea"directsubstitute"forthemotorfortheEmersonGen2powersteeringsystem
giventhedifferencesinstructure,designandfunctionbetweenthetwomotorsthatwerecommongroundbetweenthepartiesand/orwerefoundbythejudge:Issue9.
(5)Ground5:Erroneous"hypotheticalcounterfactual"inquiry:ThejudgeerredinfindingthatGlobe"couldandwould"havebeenabletoproducetheGlobeGen2motorbyinferentiallyapplyingahypothetical
counterfactualassumptioninordertodeterminethatTRWLucashadadutytocooperatewithGlobeindevelopingtheGlobeGen2motor:Issue8.
(6)Ground6:TherewasnovariationoftheAgreementtoincludePortoasaparty:ThejudgeerredinfindingthatPortobecameapartytotheAgreementbymeansofanimpliednovationorvariationbyconductbecause
(a)theconductreliedonwasnotunequivocal,and(b)Article6.3oftheAgreementprecludedvariationbyparol:Issue17.
54.Grounds(3)(5)areadvancedasalternativestoground(1)andareframedontheassumptionthatthejudgewasrightongrounds(1)and(2),theconstructionof"Products"andofthephrase"38Nm".
VI.Discussion
55.Ifirstconsidertheapproachtotheinterpretationorconstructionthetwotermsareoftenusedinterchangeablyofacontractsuchasthis.Ithenconsidertheindividualgroundsofappeal.

(a)Theapproachtointerpretation
56.Theprofessedobjectofacommonlawcourtininterpretingorconstruingawrittencontractistodiscoverthemutualintentionoftheparties.Itisnowgenerallyacceptedthatthisisnottobedonebyapurelyliteralapproach.The
formulationsbyappellatejudgeshavediffered,butthedifferenceshaveprimarilybeenonesofemphasisratherthanofprinciple.Theyrelatetotheextenttowhichtheapproachtoconstructionshouldbecontextual,theroleofbackground
material,andtherelationshipbetweentheapproachtoconstructionandtheapproachtotheimplicationofaterm.Thewealthofauthorityonthetopicandthedifferencesofformulationsuggestthat,asSirAnthonyClarkeMRstatedin
PrattvAigaionInsuranceCompanySA[2008]EWCACiv1314,[2009]1Lloyd'sRep225at[9],caremustbetakentoavoidoverelaboration.
57.Since1997,thestartingpointhasgenerallybeenthefiveprinciplesdistilledfromtheauthoritiesbyLordHoffmanninhisseminaljudgmentinInvestorsCompensationSchemevWestBromwichBuildingSociety[1998]1WLR896at912
913("theICScase").Thoseprincipleswererefinedbyhiminlaterdecisions,inparticularBCCIvAli[2001]UKHL8,[2002]1AC251,ChartbrookLtdvPersimmonHomesLtd[2009]UKHL38,[2009]1AC1101,andAttorneyGeneral
ofBelizevBelizeTelecomLtd[2009]UKPC10,[2009]1WLR1988.Inthelastofthesehereappraisedtheprocessofimplyingtermsanditsrelationshiptotheexerciseofinterpretingtheexpressterms.
58.Themostrecentadjustmentsofemphasisoccurredin2015when,inArnoldvBritton[2015]UKSC36,[2015]AC169andMarksandSpencerplcvBNPParibasSecuritiesServicesTrustCo.(Jersey)Ltd[2015]UKSC72,[2015]3WLR
1843,theSupremeCourtrevisitedLordHoffmann'sstatementsoftheprinciples.Boththosecasesinvolvedleases.Inthefirst,thechangeofemphasiswastogivegreaterweighttothewordsusedinthedocument.Inthesecondit
concernedtherelationshipbetweeninterpretationandimplication.AmajorityoftheSupremeCourtstated(see[25],[26]and[76])that,whileinterpretingthewordswhichthepartieshaveusedandimplyingwordsintothecontractboth
involvedeterminingthescopeandmeaningofthecontractinthebroadsense,"construingthewordsusedandimplyingadditionalwordsaredifferentprocessesgovernedbydifferentrules".
59.Iconsiderthatinthepresentcasetwostatementsofthegeneralapproachsuffice.Thefirstistheelegant,conciseandunelaboratepreICSstatementbySirThomasBinghamMRinArbuthnotvFagan[1995]CLC1396,at1400:
"Courtswillneverconstruewordsinavacuum.Toagreaterorlesserextent,dependingonthesubjectmatter,theywillwishtobeinformedofwhatmayvariouslybedescribedasthecontext,thebackground,thefactualmatrix
orthemischief.Toseektoconstrueanyinstrumentinignoranceordisregardofthecircumstanceswhichgaverisetoitorthesituationinwhichitisexpectedtotakeeffectisinmyviewpedantic,sterileandproductiveoferror.
Butthatisnottosaythataninitialjudgmentofwhataninstrumentwasorshouldreasonablyhavebeenintendedtoachieveshouldbepermittedtooverridetheclearlanguageoftheinstrument,sincewhatanauthorsaysis
usuallythesurestguidetowhathemeans.Tomymindconstructionisacompositeexercise,neitheruncompromisinglyliteralnorunswervinglypurposive:theinstrumentmustspeakforitself,butitmustdosoinsituandnot
betransportedtothelaboratoryformicroscopicanalysis."
ThesecondisthesummaryofthecurrentpositionbyLordNeubergerinArnoldvBritton[2015]UKSC36,[2015]AC1619at[15].Hestated:
"Wheninterpretingawrittencontract,thecourtisconcernedtoidentifytheintentionofthepartiesbyreferenceto"whatareasonablepersonhavingallthebackgroundknowledgewhichwouldhavebeenavailabletothe
partieswouldhaveunderstoodthemtobeusingthelanguageinthecontracttomean",toquoteLordHoffmanninChartbrookLtdvPersimmonHomesLtd[2009]UKHL38,[2009]1AC1101,para14.Anditdoessoby
focussingonthemeaningoftherelevantwords,inthiscaseclause3(2)ofeachofthe25leases,intheirdocumentary,factualandcommercialcontext.Thatmeaninghastobeassessedinthelightof(i)thenaturalandordinary
meaningoftheclause,(ii)anyotherrelevantprovisionsofthe[contract],(iii)theoverallpurposeoftheclauseandthe[contract],(iv)thefactsandcircumstancesknownorassumedbythepartiesatthetimethatthedocument
wasexecuted,and(v)commercialcommonsense,but(vi)disregardingsubjectiveevidenceofanyparty'sintentions."
ThissubstantiallyrepeatswhathestatedinMarleyvRawlings[2014]UKSC2,[2015]AC129at[19].
60.InArnoldvBritton,LordNeubergeralsoemphasisedanumberoffactors.Theyinclude:
(a)"Thelessclear[thecentrallyrelevantwords]arethemorereadythecourtcanproperlybetodepartfromtheirnaturalmeaning",but"theclearerthenaturalmeaning,themoredifficultitistojustifydepartingfromit":
see[18].
(b)"[W]heninterpretingacontractualprovision,onecanonlytakeintoaccountfactsorcircumstanceswhichexistedatthetimethecontractwasmade,andwhichwereknownorreasonablyavailabletobothparties":at[21].
(c)Therelianceplacedoncommercialcommonsense"shouldnotbeinvokedtoundervaluetheimportanceofthelanguageoftheprovisionwhichistobeconstrued"(see[17])and,(at[19])that"commercialcommonsenseis
nottobeinvokedretrospectively"sothatthemerefactthatacontractualarrangement,ifinterpretedaccordingtoitsnaturallanguage,hasworkedoutbadlyorevendisastrouslyforoneofthepartiesisnotareasonfor
departingfromthenaturallanguage.
Onthislastfactor,seealsoLordHodgeat[76][79].Iaddthatthecommerciallysensiblemeaningisoftennotobvious,and,whereitisnot,thecourtislesslikelytobeabletoconcludethatoneoftwoormorealternativesisthe
commerciallymoresensibleone:seee.g.CottonexAnstaltvPatriotSpinningMillsLtd[2014]EWHC236(Comm),[2014]1Lloyd'sRep615at[57][58]perHamblenJ.
61.ThepositionofprecontractualnegotiationsdidnotariseinArnoldvBrittonbutisofrelevanceinthepresentappeal.Itisnowclearlyestablishedbyauthoritythatthegeneralruleisthattheprecontractualnegotiationsoftheparties
cannotbetakenintoaccountininterpretingitstermsanddeterminingwhattheymean.Theexceptionsarewhereapartyseekstoestablishthatafactwhichmayberelevantasbackgroundwasknowntothepartiesortosupportaclaimfor
rectificationorestoppel:seeInvestorsCompensationSchemevWestBromwichBuildingSociety[1998]1WLR896at913(LordHoffmann'sthirdprinciple)andChartbrookLtdvPersimmonHomesLtd[2009]UKHL38,[2009]1AC
1101at[41][42]perLordHoffmann.Therationaleforthegeneralruleissaidtobepracticalpolicyandthepublicinterestineconomyandpredictabilityinobtainingadviceandadjudicatingdisputes.LordHoffmannrecognised(at[32]
[33])thatthegeneralrulemeansthat,inthisrespect,legalinterpretationdiffersfromthewaylanguageisinterpretedinordinarylife.HereferredtothecriticismsoftherulebyjudgesandscholarsincludingLordNicholls(2005)121LQR
577andMcLauchlan[2005]UQLJ28.Thereareothercritics,seeforexampleMcMeel(2003)119LQR272,TheConstructionofContracts(2nded.)1.811.82,andBurrows,ARestatementoftheEnglishLawofContract(2016),87
88,buttherulehasitssupporters,seeforexampleBerg,(2006)122LQR354andLewison,TheInterpretationofContracts(6thed.)106111andithaslongbeenthesettledpositioninEnglishlaw.
62.Insummary(seeArnoldvBrittonat[20]),"thepurposeofinterpretationistoidentifywhatthepartieshaveagreed,notwhatthecourtthinksthattheyshouldhaveagreed".Acourt"shouldbeveryslowtorejectthenaturalmeaningofa
provisionascorrectsimplybecauseitappearstobeaveryimprudenttermforoneofthepartiestohaveagreed,evenignoringthebenefitofwisdomofhindsight".
63.InhisjudgmentthejudgementionedthattheAgreementinthiscasewasalongtermcontractonanumberofoccasions.Thequestioniswhetherthisaffectsorshouldaffecttheapproachtointerpretation,and,ifso,how.Istatedthat
ArnoldvBrittoninvolvedleases,indeedverylongleases,of99years.LordHodgestated(at[72])thatininterpretingtheleasesthecourt"shouldtakeintoaccountthegreatdifficultyinpredictingeconomiccircumstancesinthedistant
futureandaskitselfwhetherthepartiesreallyintendedtodoso",butitisnotsuggestedbyhimorLordNeubergerthatthecourt'sbasicapproachtotheconstructionofthoseleaseswasaffectedbythat.

64.Theprincipledstartingpointinasystemwhich,despitestatutorycontrolandinequalityofbargainingpower,restsontheassumptionthatpartiestoacontractarefreetodetermineforthemselveswhatobligationstheywillacceptisthatitis
largelyforthepartiestoalongtermcontracttoinsertintoitclauseswhichdealwiththeparticularproblemsencounteredbythosewhoenterintosuchcontracts.In1995ProfessorMcKendricksuggestedthatthefunctionofthecourtisthe
traditionalone,"namelytoenforceandgiveeffecttotheintentionofthepartiesasexpressedintheclausesinwhichtheirobligationsarecontained":seeBeatsonandFriedman(eds),GoodFaithandFaultinContractLaw(1995)305.He
statedthat"inparticular,longtermcontractsmustoftenbephrasedinbroad,flexibletermstoenablethepartiestoadjusttheirbargaintomeetchangingcircumstances."Hisprimaryconcernwasthatcourtsshouldadoptaflexibleapproach
totheinterpretationofsuchclausesandnotbetooastutetodeclarealongtermcontractunenforceableonthegroundofuncertaintyorvagueness.
65.ThatapproachwasapprovedinTotalGasMarketingLtdvArcoBritishLtd[1998]2Lloyd'sRep209,acaseinvolvingthesaleof50%ofArco'sinterestinagasfieldintheNorthSea,thelifeofwhichwasestimatedtobeabout14years.
LordSteynstated(at218)thattherearenospecialrulesofinterpretationapplicabletolongtermcontractsofatypethataresometimescalledrelationalcontracts.Butinanappropriatecase:
"acourtmaytakeintoaccountthat,byreasonofthechangingconditionsaffectingsuchacontract,aflexibleapproachmaybestmatchthereasonableexpectationsoftheparties.But,asinthecaseofallcontracts,loyaltyto
thecontractualtextviewedagainstitsrelevantcontextualbackgroundisthefirstprincipleofconstruction."
66.Morerecently,inExcelsiorGroupvYorkshireTelevision[2009]EWHC1751(Comm)FlauxJtookasimilarapproach.Hewasconsideringwhetherthephrase"allthetransmittersoftheIBAservingITV"inaclauseinanagreementmade
inJuly1990fortheproductionandexploitationoftelevisionfilmsinwhichitwascontemplatedthatitwouldlastformanyyearscovereddigitaltransmittersaswellastheanaloguetransmitterswhichexistedwhenthecontractswere
made.Heaccepted(at[14])that"itmaybethat,evenifaconceptorentitydidnotexistatthetimethecontractwasmade,thecontract,properlyconstruedbyreferencetowhatwordsorphrasesusedmeantatthetime,mayhaveused
wordsofsufficientwidthtoencompassthatconceptorentitywhenitcomesintoexistence",butstatedthatthewordshadtobeinterpretedinaccordancewithwhattheymeantobjectivelywhentheagreementwasmade.Heconcluded(see
[88][90]and[92][93])thatthewords"allthetransmitters"didnotcoverdigitaltransmitterswhichdidnotexistandwerenotevencontemplatedin1990.Hestated(at[93])that"itwouldbeacompletedistortionoftheprinciplesof
constructiontoconcludethat[theclause]shouldbegivensomewidermeaningthanthewordsoftheclausewillbear,merelybecausethewaythatthetelevisionindustryhasdeveloped,unanticipatedatthetime"oftheagreementshas
turnedouttobedisadvantageoustoExcelsior.Bycontrast,thephrase"anyandallmedianowknownorhereafterdevised"inalatercontractwasflexibleenoughtoencompassaconceptorentitynotinexistenceatthetimeofthe
agreementwhenitcameintoexistence.
67.OnemanifestationoftheflexibleapproachreferredtobyMcKendrickandLordSteynisthat,incertaincategoriesoflongtermcontract,thecourtmaybemorewillingtoimplyadutytocooperateor,inthelanguageusedbyLeggattJin
YamSengPTEvInternationalTradeCorpLtd[2013]EWHC111(QB)at[131],[142]and[145],adutyofgoodfaith.LeggattJhadinmindcontractsbetweenthosewhoserelationshipischaracterisedasafiduciaryoneandthose
involvingalongertermrelationshipbetweenpartieswhomakeasubstantialcommitment.Thecontractsinquestioninvolvedahighdegreeofcommunication,cooperationandpredictableperformancebasedonmutualtrustand
confidenceandexpectationsofloyalty"whicharenotlegislatedforintheexpresstermsofthecontractbutareimplicitintheparties'understandingandnecessarytogivebusinessefficacytothearrangements".Hegaveasexamples
franchiseagreementsandlongtermdistributionagreements.Eveninthecaseofsuchagreements,however,thepositionwilldependonthetermsoftheparticularcontract.Twoexamplesoflongtermcontractswhichdidnotqualifyarethe
longtermfranchisingcontractsconsideredbyHendersonJinCarewatchCareServicesLtdvFocusCaringServicesLtdandGrace[2014]EWHC2313(Ch)andtheagreementbetweendistributorsoffinancialproductsandindependent
financialadvisersconsideredbyElisabethLaingJinAcerInvestmentManagementLtdandanothervTheMansionGroupLtd[2014]EWHC3011(QB)at[109].
68.ThisisnottheoccasiontoconsiderthepotentialforimplieddutiesofgoodfaithinEnglishlawbecausethequestioninthiscaseisoneofinterpretationorconstruction,andnotoneofimplication.Itsufficestomaketwoobservations.The
firstistoreiterateLordNeuberger'sstatementinMarksandSpencerPLCvBNPParibasSecurityServicesTrustCo(Jersey)Ltd(see[58]above)that,whateverthebroadsimilaritiesbetweenthem,thetwoare"differentprocesses
governedbydifferentrules".Thisis,seethestatementofLordBinghaminPhilipsElectroniqueGrandPublicSAvBritishSkyBroadcastingLtd[1995]EMLR472,at481citedbyLordNeuberger,because"theimplicationofcontract
termsinvolvesadifferentandaltogethermoreambitiousundertaking:theinterpolationoftermstodealwithmattersforwhich,exhypothesi,thepartiesthemselveshavemadenoprovision".Thesecondisthat,asseenfromtheCarewatch
CareServicescase,animplicationofadutyofgoodfaithwillonlybepossiblewherethelanguageofthecontract,viewedagainstitscontext,permitsit.Itisthusnotareflectionofaspecialruleofinterpretationforthiscategoryof
contract.
69.Inthepresentcase,wheretheAgreementwasforexclusivesupplyand,absentinsolvencyormaterialbreach,wasforthelifetimeoftheplatformsandalongtermagreement,theflexibilityofapproachIhavedescribedmighthavegiven
considerableforcetoasubmissionthattherewasanimpliedobligationonTRWLucastogiveGlobeanopportunitytoshowthatitcouldprovideaGen2motor.Thatsubmissionwas,however,notmadebyGlobe,perhapsbecause(see
[30]above)anybreachofsuchanobligationwouldhaveoccurredatthelatestby23February2003whenthecontractwasawardedtoEmersonandbywhichtimeGlobehadbeenexcludedforaminimumofsixmonths.Accordingly,by
2011,whenproceedingswereissued,aclaiminrespectofbreachofthatobligationwouldhavebeentimebarred.
70.Globe'scaseisthatachangeinthespecificationsofa"Product"withintheAgreementthat"couldandwouldbeeffectedby'EngineeringChanges'"meansthattheresultingmotororassemblyqualifiesasoneofthe"Products"underthe
Agreementevenwherethebuyer(TRWLucas)hasnot"proposed"thechangestothesupplier(Globe)andthepartieshavenotgonethroughthe"EngineeringChanges"process.Ifthatisso,therewouldbeabreachwheneverTRWLucas
boughtfromanyoneotherthanGlobeandclaimsinrespectofpurchasesafter1June2005wouldnotbetimebarred.
71.InthelightofwhattheSupremeCourthasstatedaboutthedifferencebetweentheprocessofimplicationandtheprocessofinterpretation,caremustbetakennottoseektoachievethatwhichmightbeachievedbyimplicationbyan
inappropriateapproachtointerpretation.
(b)Ground1:DoestheGen2motorwhichGlobe"couldandwouldhavebuilt"fallwithinthedefinitionof"Products"intheAgreement?
72.ItwassubmittedonbehalfofTRWLucasthattheprocessfordeterminingwhetheramotorisoneofthe"Products"thatarecoveredbytheAgreementisstraightforwardandrequiresapositiveanswertooneofthreequestions.Theyare:
wasthemotorspecifiedundertheAgreementwasthemotoraddedbymutualconsentandwasthemotordevelopedundertheEngineeringChangesprocessinArticle4.1?Unlesstheanswertooneofthesequestionsis"yes",TRWLucas
wasfreetoobtainthemotorfromwhomsoeveritwanted.Itiscommongroundthattheanswertothesequestionswas"no"andthatthemotorhadnotinfactbeendevelopedbytheEngineeringChangesprocess.Thejudge'sapproach(see
[45]and[49]above)wasthatamotorwhichhadnotactuallyundergonetheEngineeringChangesprocessfellwithinthedefinitionof"Products"ifithypotheticallycouldhavedoneso.TRWLucas'scaseisthatthejudgeerredingiving
theword"Products"anextendedmeaning.Itarguedthatthiswaswhollycontrived.ItusedwordswhichdonotappearintheAgreement,therearenootherwordsintheAgreementwhichcouldbegiventhatmeaning,andthatthereisno
basisforimplyingthemintoit.
73.Globe'scaseisthat"Products"hastoincludemotorsthatwouldmeetRenault'sGen2requirementswhichcouldbeproducedbyEngineeringChangestotheGen1motorswhetherornotthepartiesactuallywentthroughtheEngineering
Changesprocess.ThisisbecauseotherwiseTRWLucascouldwalkawayfromtheAgreementanditsexclusivitybychangingthespecificationsofthemotorrequired.GlobemaintainsthatTRWLucas'spositiondirectlycontradictsthe
expressdefinitionof"Products"inArticle1.1as"includ[ing]butnotlimitedtomotorandleadframeassemblyfor38NmRenault/P1"(emphasisadded).ItalsoreliedonwhatMrLowensteincalled"thelifeofplatformcommitment"
reflectedbyArticle5.1,whichprovidesthatthetermoftheAgreement"shallcontinueforthelifetimeofeachoftheplatformsatarateof100%oftheplatformrequirementasestimatedinArticle1.2".

74.BeforeturningtotheconstructionoftheAgreement,Irecordmyagreementwiththejudge'sconclusion(judgment,206,referredtoat[34]above)thattheboundarybetweenengineeringchangeandnewproductis"aquestionoffactand
degree".AsobservedbyUnderhillLJduringthehearing,theconcepts"newproduct",and"newgenerationofthesameproduct"producedbyEngineeringChangesarewoollylabelsandmattersofdegree.
75.TheAgreementwaspoorlydraftedandwasofalongtermnature.Itisunderstandablethatthejudgewishedtointerpretitinawaywhichreflectedwhatheconsideredtobeitscommercialmatrix.Iacceptthat,particularlybecauseofits
longtermnature,thecourtshouldseektoconstrueittoenableflexibilitytomeetchangingcircumstances.InLordSteyn'swordsinTotalGasMarketingLtdvArcoBritish(setoutat[65]above)aflexibleapproachmaybestmatchthe
reasonableexpectationsoftheparties.Thisfactor,togetherwiththelanguageoftheAgreement,hasledmetorejectTRWLucas'sground2,itsargumentthatArticle1.1expresslylimitedthescopeoftheAgreementtomotorsfortheEPAS
systemfortheRenault/P1whichhadatorqueratingof38Nm.Idealwiththatbrieflyat[90]below.
76.InTotalGasMarketingLtdvArcoBritishLordSteynalsostatedthatthefirstprincipleofconstructionisloyaltytothecontractualtextviewedagainstitsrelevantcontextualbackground.Ihavereferred(at[58]and[59]above)tothe
emphasisLordNeubergerplacedinArnoldvBrittonontheneedtofocusonthemeaningoftherelevantwordsintheirdocumentary,factualandcommercialcontextsandhisstatementthatthefactthatacontractualarrangementhas
workedoutbadlyordisastrouslyforoneofthepartiesisnotareasonfordepartingfromthenaturallanguage:seealsoLordHodgeat[76][77].ThestartingpointmustthereforebethelanguageofArticles1and4oftheAgreement.
77.Itistoberecalled(see[13]above)thatTRWLucasandGlobeagreedthedetailedspecificationsthatappliedalthoughthesewerenotattachedtoanAppendixtotheAgreement.TherearetwowaysinwhichthewordsoftheAgreement
enableamotororanassemblynotwithinthedetailedspecificationstoqualifyas"Products"withintheAgreement.ThefirstiswherethemotororassemblyisaddedbymutualagreementpursuanttotheexpresstermsofArticle1.1andis
"anadditionalproduct".Thesecondiswherethemotororassemblyistheresultof"EngineeringChanges"madepursuanttoArticle4toaProductwithinthedetailedspecification.Sinceitiscommongroundthattherewasno"mutual
agreement"withinArticle1.1,IturntoArticle4.
78.Article4providesthatthebuyer(TRWLucas)reserves"therighttopropose"changesinthespecificationsorotherrequirementsrelatingtotheProducts,whicharetermed''EngineeringChanges".Thesupplier(Globe)"hastomutually
agree".Theuseoftheterms"propose"and"mutuallyagree"arestrongindicationsfavouringTRWLucas'ssubmissionthatforachangedmotororassemblytoqualifyasoneofthe"Products"subjecttotheexclusivityprovisionsand
obligationsintheAgreementasaresultofArticle4itisnecessaryforthepartiestoagreetheEngineeringChangesproposedandfortheprocessdescribedinArticles4.2and4.3tohavebeenundertaken.MrDownesdidnotacceptthat
Article4gaveTRWLucastherighttorequirean"EngineeringChange"(Day1,p49ll.912).Ihave,however,concludedthatthelanguageofArticles4.14.3andtheasymmetrybetweenthepositionofthebuyerandthesellerin
relationtoEngineeringChangesmeanthatisnotcorrectanditisnotnecessaryinallcasesforbothpartiestoagreetheEngineeringChangesproposed.Thepositionismorenuancedthanthat.
79.TheasymmetryisseeninthefactthatArticle4.1providesthatthebuyer(TRWLucas)reservesthe"righttoproposeanengineeringchangeandhasto"adviseSupplier"(Globe)by"priorwrittennotice",butthesupplier"has"toagree.By
contrast,wherethesupplierproposestomakeanengineeringchange,it"mustobtainpriorwrittenapprovalfromBuyer".InArticle4.2theasymmetryisseenbecausewhereasthebuyercangive"noticeofanEngineeringChange",the
suppliercanonlygivenoticeof"aproposedEngineeringChange".TheprovisioninArticle4.3forreimbursementofreasonablecostsassociatedwithengineeringchangesonlyappliestothose"madebyBuyer".
80.Forthesereasons,Iagreewiththejudge(judgment,[206]summarisedat[34]above)thatiftheproposedalterationisachangetothespecificationandnomorethebuyer(TRWLucas)canimposeitonthesupplier(Globe).Ihavestated
([74]above)thatIalsoagreewithhimthatwhetherachangetothespecificationisan"EngineeringChange"orwhetheritcreatesanewproduct"isaquestionoffactanddegree".Itisinmyjudgmentclearthattheexpresswordsofthe
Agreementprovidethatthebuyerisabletoimposeengineeringchangesbutthesupplierisonlyentitledtoproposesuchchanges.ThisconclusionisconsistentwithTRWLucas'spositionthatforachangeofspecificationstoamotoror
assemblytoqualifyasaProductwithintheAgreementTRWLucasmustagreetoit,eitherasan"additionalproduct"orasanEngineeringChangewithinArticle4.
81.Thecrucialquestionthenbecomeswhetherthejudgewasalsocorrecttostate(judgment,[206])that,inthecaseofaproposedalterationwhichisachangetothespecificationandnomore,thebuyer,TRWLucas,isobligedtoofferittothe
supplier,Globe,andthatifitdidnot,whatcouldandwouldbeachievedbythesupplierbyEngineeringChangesbecomesoneoftheProductswithintheAgreement.Globedidnotarguethatthereisabasisforimplyingatermtothiseffect
intotheAgreement,sotheissueisthemeaningandscopeoftheexpressterms.Thejudge(judgment,[206])heldthatinthecontextoftheAgreementitstermsobligedTRWLucastoproposetoGlobethoseEngineeringChangeswhichdid
notresultintherebeinganewProductalthoughherecognised(judgment,[224])thatthisconclusionisbasedonwordswhicharenotintheAgreement.Theeffectofthejudge'sconclusionistoimposesuchanobligationonTRWLucas,
andtodosobyconstruingthetermsoftheAgreementratherthanbyimplyingatermtothateffect.
82.Thereareundoubtedattractionsinachievingaresultwhichpreventsthebuyerfromwalkingawayfromtheagreementwherethecarmanufacturerchangesthespecificationsinawaythatcanbeachievedbyengineeringchangesratherthan
byanewproductorwheresuchachangetothespecificationsismadebythebuyerforotherreasons.ThequestioniswhetheritispossibletodothisbyinterpretingthetermsoftheAgreementandtheword"Products"initandthusthe
scopeoftheexclusivitysothattheresultofsuchhypotheticalengineeringchangesfallswithinthedefinitionof"Products"intheAgreementwherethebuyerhasnotproposed"EngineeringChanges",oragreedtosuchchanges.The
answerdependsonwhetherthereisabasisforthismeaninginthewordsoftheAgreementanditsfactualmatrix.
83.Ihavesummarisedandsetoutthejudge'sreasoningat[225][226]at[35][36]above.Thejudge'sapproachmovedfromtheuncontroversialpropositionthat,ifachangetoamotorhadgonethroughthe"EngineeringChanges"process
itwouldbecomeoneofthe"Products"subjecttotheAgreement,tothepropositionthatevenifithadnotgonethroughtheprocessitwouldbeaProductandwouldbewithintheAgreementifit"couldandwould"havegonethroughthe
process.Saveforstating(see[35]above)thatArticle1.1providedthat"theProducts""includebutarenotlimitedto"themotorsandassembliesforthethreeplatforms,hedidsowithoutexplainingwhythelanguageoftheAgreement
permittedthis.Thejudgeconsideredthathisconstructionwasareasonableone,butrecognisedthatitwasnotbasedonwordsintheagreementorhowhismeaningcouldbederivedfromthewordsoftheAgreement.
84.Inmyjudgmentthemovetothesecondpropositioninvolvedanerror.ThestructureoftheAgreementisthatchangestotheProductgovernedbyitandtheexclusivityprovisionsaretobebyagreementbetweentheparties(Article1.1and,
inrelationtoEngineeringChangesproposedbythesupplier,Article4.1)orbyEngineeringChangesnotifiedbythebuyer(Article4.1).Ihavestatedthattheuseoftheterms"propose"and"mutuallyagree"arestrongindicationsofthe
needforanactualagreementtochangesandtheAgreement,particularlyArticle4,envisagesanactualprocess,ratherthanahypotheticalone.
85.Itis,inmyjudgment,significantthatthedominantroleintheEngineeringChangeprocessisgiventothebuyer(TRWLucas)andthattheAgreementdoesnotgivethesupplier(Globe)powertoimposeEngineeringChangesonthebuyer
toreflectchangesinthespecificationsasaresultofRenault'srequirementsorinthepositionofTRWLucas.Inthosecircumstances,IdonotconsiderthatitispossibletoconstruethewordsoftheAgreementasimposinganobligationon
TRWLucastoproposeEngineeringChanges.TodothatwouldinsubstancebethesameasgivingpowertoGlobetorequiresuchEngineeringChangestobringtheresultingmotororassemblywithintheumbrellaofthe"Products"inthe
Agreement.AconstructionwhichdidthiswouldthusbeinconsistentwiththeasymmetryinArticle4aboutthepositionofthepartiesinrelationtoEngineeringChanges.Forthesereasons,Ihaveconcludedthat,adaptingLordHodge's
wordsinArnoldvBrittonat[77],thereisnobasisforthejudge'sconstructioninthewordsusedintheAgreement.
86.Anotherpoint,althoughoflessersignificance,isthattheallocationofrisksintheAgreementmadesomeprovisiontoprotectthepositionofthesupplier.Article2.6guaranteedtheestimatedvolumesuptotheamountofthesupplier's
amortisedcostsoverthefirstfiveyears.TRWLucasthusguaranteedGlobe'scapitalexpendituretothatlevelandforthatperiod,andtothatextentTRWLucastooktheriskoflowerthananticipatedvolumes,Globewasnotleftwholly
exposedbychangesofspecificationsbyRenaultorTRWLucas.

87.TherealityisthatGlobeisseekingtoachievebyinterpretationwhatitmightpossiblyhaveachievedinacontractsuchasthisbyanimpliedobligationtocooperateoractingoodfaithingivingGlobetheopportunitytoproduceaGen2
motortomeetRenault'schangedspecifications.IntheparticularcircumstancesofthiscaseandthedateonwhichproceedingswereinstitutedthatalternativewouldnothaveenabledGlobetoprevailbecause(see[69][70]above)breach
ofsuchanobligationwouldhavebeentimebarred.WhetherornotthatwasthereasonGlobemadeitclearthatitwasnotrelyingonanimpliedterm,onceanimpliedtermisexcludedandthequestioniswhatthelanguageofthe
Agreementpermits,IconsiderthatitwasnotopentothejudgetointerpretthetermsoftheAgreementinthewayhedid.
88.Havingreachedmyconclusionforthereasonsgivenabove,Inotethatthisisnotacasewherethechangeisdeminimis.IhavesummarisedthedifferencesbetweentheGen1andGen2motorsat[27]aboveandthejudge'sconclusionsat
[43]above.Thenewspecificationwasforamotorwhichhadanumberofdesigndifferencesandwhichwouldneednewvalidation.
(c)Grounds25
89.Inviewofmyconclusiononground1,itisnotnecessarytodecidewhetherTRWLucasalsosucceedsongrounds2to5.Therewouldalsobesomeartificialityindealingwiththerivalsubmissionsongrounds25becauseTRWLucas's
caseonthosegroundsandGlobe'sresponseproceededonthebasisthatthejudgewasrightonthequestionsofconstruction.Forthosereasons,althoughtherewasfullargumentonthosegrounds,Ionlysummarisewhy,hadIconcluded
thatthejudge'sinterpretationofthemeaningoftheword"Products"wascorrect,Iwouldhavedismissedtheappealsongrounds2to5.
90.(i)Ground2:"38Nm"EPASsystem:Itwascommongroundthatthereferencesto"38Nm"aretothetorqueratingofthesystemandnotthemotors,andthustoafactoroverwhichGlobehadnocontrolwhatsoeverandwhichcouldbe
variedbyTRWLucaswithoutGlobe'sknowledge.Moreover,thesamemotormightbeusedinEPASsystemswithdifferenttorqueratings.Secondly,theconstructionadvancedonbehalfofTRWLucasisdirectlyinconsistentwiththe
expresswordsofArticle1.1whichstatesthat"Products"are"notlimitedto"motorsfora38NmEPASsystemortheothertwoEPASsystemsidentified.TheconstructionadvancedonbehalfofTRWLucasalsodoesnotexplainwhy,
giventhefactthatitwascommonfortheretobechangestothesystemNmintheevolutionofaproduct,Article5.1providesthatthetermoftheAgreement"shallcontinueforthelifetimeofeachoftheplatforms".
91.(ii)Ground3,"EngineeringChanges":Thejudgedidresolvetheissue(seejudgment,[204][206])andconcluded(judgment,[369][371])thatthechangesGlobecouldandwouldhavemadewere"EngineeringChanges".Thejudge
wasentitledtofind(judgment,[152])thattheterm"EngineeringChanges"hadnospecialindustrymeaning,andtorejectProfessorAckva'sview,whichhestatedwasmorerigidandformalistic.Inthosecircumstances,thejudgewas
entitledtogivethetermitsnaturalandordinarymeaning.
92.ThesubmissionthatthejudgewasnotentitledtorelyontheevidenceofMrArwineinordertorejectProfessorAckva'sevidencebecauseMrArwinewasawitnessoffactandnotanexpertglossesoverthefactthatquestionsof
constructionareamatterforthecourtandthat,particularlyabsentaspecificindustrymeaning,thejudgewasentitledtoreachtheconclusionthathedid.MrDownesdidnotsubmitthattheevidencewasinadmissiblesimplybecauseCPR
35hadnotbeencompliedwith.ThejudgewasentitledtoregardMrArwine'sevidence,properlycharacterised,asessentiallyfactual,becausewhathewasdoingwasexplaininghowGlobewouldhavegoneaboutmanufacturingaGen2
motortomeetthefunctionalspecificationsoftheEmersonGen2.Afterhearinghisevidenceastothesimulations,thejudgeconcluded(judgment,[275])thatGlobewouldhavebeenabletodelivertheGlobeGen2motor.Thesubject
matteroftheevidenceonthe"couldandwould"issueishighlytechnical.InthelightofthedecisionofJacksonJinMultiplexConstructions(UK)LtdvClevelandBridgeUKLtd[2008]EWHC2220(TCC)at[672],thejudgedidnoterr
inregardingMrArwine'sevidenceasadmissible.IconsiderthatapproachcannotbeconfinedtoTCCcases,andmustapplybyanalogytocasessuchasthepresent.
93.(iii)Ground4:"directsubstitute":Thisconcernsthepositionif,asthejudgefound,thehypotheticalGlobeGen2qualifiedasoneofthe"Products"withintheAgreement.Inthecircumstancesofthiscase,Iconsiderthatthefunctional
specificationstestadoptedbythejudgewasanadequateprimarytoolwhentakentogetherwithconsiderationsofsafety,timingandcost,whichthejudgealsotookintoaccount,fordeterminingwhethertheGlobeGen2wasorwouldbea
directsubstitute.SomeofMrDownes'ssubmissionsonthispointwere,insubstance,challengestodetailedfindingsoffact,mattersofopinionandtechnicalanalysis,forwhichtherewasnopermissiontoappeal.Thereis,inanyevent,
forceinthesubmissionsonbehalfofGlobeinAppendixC(3)toitsskeletonargumentthattheremainingdifferencesbetweenthemotorswereeithernotcritical,ofnoapparentconcerntoRenault,oroneswhichthepartieswouldhave
resolvedasTRWLucasandEmersoninfactdidwhenagreeingforEmersonGen2motorswhichdifferedfromthewrittenspecifications.
94.(iv)Ground5,a"hypotheticalcounterfactual"inquiry:proceedsonthebasisthattherewasnopleadedcasethatTRWLucaswasinbreachofcontractorotherlegaldutyinfailingtocooperatewithGlobe,andthatinanyeventany
claimforbreachoftheAgreementbyfailingtocooperatewouldbestatutebarred:see[69],[70]and[87]above.NeitherGlobenorthejudge,however,reliedonacontractualdutytocooperate.Thequestionofcooperationonlyaroseon
theassumptionthatTRWLucas'spurchaseofGen2motorsfromEmersonwasabreachoftheAgreement.ThejudgethenusedthehistoryofcooperationbetweenthepartiestoevaluatewhatTRWLucaswouldhavedonehaditoperated
theArticle4"EngineeringChanges"process.
(d)Ground6:TherewasnovariationoftheAgreementtoincludePortoasaparty:
95.MrDownessubmittedthattherequirementinArticle6.3thatanyamendmentbeinwritingandbesignedbybothpartiesmeantthatitwasnotopentothepartiestoamendtheAgreementorally.Hemaintainedthatthejudgeandthiscourt
areboundbytheCourtofAppeal'sdecisioninUnitedBankLtdvAsif(11February2000)thatacontractcontaininganantioralvariationclausecanonlybeamendedbyawrittendocumentcomplyingwiththatclause.Healsoarguedthat
thecasesreliedonbyGlobeandthejudgeareoflimitedassistanceand,irrespectiveofauthority,thattherearesoundreasonsforrecognisingtheefficacyofaclausesuchasArticle6.3.MrDownesalsoarguedthat,ontheevidence,the
judgeerredinfindingthatPortobecameapartytotheAgreementbecausetheconductreliedonwasnotunequivocalandconsistentonlywithsotreatingPorto.
96.Mydecisiononground1meansthatitisnotnecessarytodecidethisground.Whileconsciousofthedisadvantagesofaddingtotheobiterstatementsonthetopic,IhaveconcludedthatIshoulddealwithitbecausetherearetwoCourtof
Appealcasesonwhatisanissueofprinciple,thesecondWorldOnlineTelecomLtdvIWayLtd[2002]EWCACiv413,is(seeat[102][104]below)insubstanceinconsistentwithUnitedBankLtdvAsif,andtherewasfullargument
beforeus.
97.(i)Principleandpolicy:IshallfirstdealwiththereasonsofprincipleorpolicyreliedonbyMrDownestosupporttherecognitionoftheefficacyofaclausesuchasArticle6.3aspreventingvariationswhichdonotcomplywithit.He
submittedthat"antioralvariation"clausespromotecertaintyandavoidfalseorfrivolousclaimsofanoralagreement.Thisisinpartbecause,whilesuchclaimsmaybedisprovedafterafulltrial,theymightcarrythedaywhentheparty
makingtheclaimresistssummaryjudgment.Healsostatedthatsuchclausescanusefullypreventapersoninalargeorganisationproducingadocumentwhichunwittinglyandunintentionallyisinconsistentwithaprovisioninacontract
betweentheorganisationandacounterparty.Theythussetanevidentialthreshold.MrDownesalsopointedtothestatutoryrequirementsofwritinginagreementsforthedispositionofaninterestinland,guaranteesandothertransactions.
HedidnotsuggestthatanylegislationappliedtotheAgreementinthiscase.Hisargumentwasananalogicalone.Hesubmittedthatsincecontractisbasedonconsent,ifParliamentcanstipulateforformalitydespitethepotentialinjustices
andhardcasesthatcanresult,"howmuchmoreshouldthepartiesthemselves,byconsent,beabletoadoptsucharegime":Day2,p.39.
98.Atonestage(Day2,pp.2728)MrDownesappearedtoacceptthataclearoralagreementtovaryhaseffectnotwithstandingsuchaclause.However,hisultimatepositionwasthatthetensionbetweenfacilitatingcertaintyandavoidinga
trapforthosewhoforgettheclauseandhavevariedtheagreementorallycanberesolvedbyallowinghardcasestobedealtwithbythedoctrineofestoppel.Estoppel,heargued,providesasafetynetwheredetrimentisshown.

99.MrDownes'sargumentbasedontheanalogywithstatutoryrequirementsofwritingincontractsis,inmyjudgment,misconceived.Therearecommonlawrestrictionsonthefreedomofcontractingpartiestoagreethetermsofacontract.
Oneistheruleprohibitingclausesprovidingforthedamagestobepaidforabreachofcontractwhicharepenalbecausetheyimposeadetrimentonthecontractbreakeroutofallproportiontoanylegitimateinterestoftheinnocentparty
intheenforcementofthecontract'sprimaryobligations.Anotheristhedoctrineofrestraintoftradewhichprotectstherightsofindividualstoworkandprohibitscontractualprovisionswhichunreasonablyprohibitorrestraintheirrightto
doso.MrDowneswasnot,however,abletopointtoacommonlawprincipleprecludinganoralagreementwhereitssubjectisanotheragreementwhichcontainsaclausesuchasArticle6.3.
100.Absentstatutoryorcommonlawrestrictions,thegeneralprincipleoftheEnglishlawofcontractisthattowhichIreferredat[64]above.Thepartieshavefreedomtoagreewhatevertermstheychoosetoundertake,andcandosoina
document,bywordofmouth,orbyconduct.Theconsequenceinthiscontextisthatinprinciplethefactthattheparties'contractcontainsaclausesuchasArticle6.3doesnotpreventthemfromlatermakinganewcontractvaryingthe
contractbyanoralagreementorbyconduct.
101.(ii)Authority:Itshouldberecalledthat,eveninthecaseofdeeds,sincetheJudicatureActsithasbeenpossibletovaryadeedorally:seeChittyonContracts(32nded.)paragraph1143.ChittyonContractsalsostates(paragraph22045,
note196)that"thebetterviewwouldappeartobethatitispossibleforpartiestowaivecompliance"withsuchaclausethatis,thatoralvariationispossiblenotwithstandingtheclause.Thereis,moreover,positivesupportforthis
propositioninWorldOnlineTelecomvIWayLtd[2002]EWCACiv413,inthestatementsintherecentfirstinstancedecisionsreliedonbythejudge,andinotherdecisions.
102.UnitedBankLtdvAsifandWorldOnlineTelecomvIWayLtdwerebothappealsfromdecisionsaboutsummaryjudgment.IntheUnitedBankcaseThorpeandMantellLJJdismissedanappealfromtheorderofWrightJwhohadupheld
thedecisionofaMastergivingthebanksummaryjudgmentagainsttheguarantorsofacompany'sdebtstothebank.Thedeedofguaranteeprovidedthat"novariationshallbevalidoreffectiveunlessmadebyoneormoreinstruments
inwritingsignedbytheparties".Theguarantors'defencewasthattherehadbeenfraudbyaMrLateef,theBank'sChiefofSpecialAssetsManagementwhohadorallyagreedtovarythetermsoftheguaranteebyextendingthetimefor
paymentofasumwhichwasanagreedcompromiseindischargeofthedebt.WrightJheldthattheallegationsoffraudatthecentreofthedefencewereclearlyunsubstantiated,theallegedoraldiscussionscouldnotamounttoavalid
variation,andMrLateefhadnoauthoritytobindthebank.
103.Onthe"nooralvariation"clause,WrightJstatedonlythathesimplycouldnotacceptthesubmissionthatitwasopentoanofficerofthebanktoeffectivelydisregardtheexpressprovisionrequiringwritingandtovarythedeedsorally.
Whenrefusingpermissiontoappealonthepapers,SedleyLJstated:
"WrightJwasincontestablyrightinconcluding
(a)thatnooralvariationofthewrittentermscouldhaveanylegaleffect,and
(b)thatinanyeventMrLateefhadnoauthority,eitheractualorostensible,tobindtheBank.
Thisbeingso,nothingintheargumentsadvancedbelowornowadvancedcanaffordadefence."
PermissiontoappealwassubsequentlygivenbyPotterLJ.Inhisjudgmentdismissingtheappeal,ThorpeLJ,withwhomMantellLJagreed,adoptedthereasonsgivenbySedleyLJ.
104.IntheWorldOnlineTelecomcasetheappealwasagainsttherefusalofMittingJtogivesummaryjudgmenttoWorldOnlineTelecom.Dismissingtheappeal,SedleyLJstated(at[11][12])thatthequestionwhetherpartiescouldoverride
aclauseinanagreementinwritingexcludinganyunwrittenvariationsofthecontractwas,asamatterofEnglishlaw,sufficientlyunsettledtobeunsuitableforsummarydetermination,andthatthesuccessfulrespondent'sskeleton
argumentdeployedtextbookandjudicialsupportforaflexibleapproach.Healsostated(at[10])that"[i]nacaselikethepresentthepartieshavemadetheirownlawbycontracting,andcaninprincipleunmakeorremakeit".MrDownes
notedthattheUnitedBankcasewasnotreferredto.TheWorldOnlineTelecomcaseisneverthelesspositivesupportfortheeffectivenessofanoralvariationoronebyconductdespitesuchaclause,andwithfullerreasoningthanthatinthe
UnitedBankcase.Moreover,asaresultoftheCourtofAppeal'sdecisionintheWorldOnlineTelecomcasetherewasatrialintheCommercialCourt.Attheconclusionofthattrial,SteelJheldthat,notwithstandingtheclause,the
conditionsinthecontractinthatcasehadbeenvariedbytheoralagreement:see[2004]EWHC244(Comm).
105.ItispossiblethatinacasesuchastheUnitedBankcaseinvolvingbankingguaranteesthereisacaseforlessflexibilitybecausetheStatuteofFrauds1677providesthattheguaranteeitselfmustbeinwriting,butthatwasnotthereason
giveninthatcase.Atthehearingoftheappealinthepresentcase,itwassuggestedthatthedifferencebetweenSedleyLJ'sreasonsforrefusingpermissiontoappealintheUnitedBankcaseandhisapproachinWorldOnlineTelecomvI
WayLtd.showedhehadchangedhismind.ItismorelikelythathedidnothaveinmindadecisionmadetwoyearsearlieronanapplicationconsideredonthepapersandthathisconclusionintheWorldOnlinecasereflectedthewritten
andoralsubmissionshehadonthepoint.
106.AstotheothercasesreliedonbyGlobeandthejudge,itistruetheyarenotdecisionsinwhichitwasheldthatanoralagreementcanoverridean"antioralvariation"clauseinacontract.AsMrDownesobserved,althoughGlosterLJin
EnergyVenturePartnersLtdvMalabouOil&GasLtd[2013]EWHC2118(Comm)at[271][274]statedsheinclinedtotheviewthattherecanbeanoralvariationnotwithstandingsuchaclause,shefoundtherewasinfactnooral
agreementtovarytheminimumfeeclauseinthecontractinthatcaseandthattheimpliedagreementshefoundthatareasonablefeebepaiddidnotoffendtheclause.Similarly,StuartSmithJ'sstatementinViruliteLLCvVirulite
Distribution[2014]EWHC366(QB)at[55]thatthecorrectviewontheauthoritieswasthatanantivariationclausedoesnotprecludeavariationfromtakingeffectwasmadewithoutthebenefitofargumentbecausethepointhadbeen
concededinthatcase.Thesefactors,however,donotdetractfromtherecognitionbytheseexperiencedjudgesthatinprincipleanoralvariationcanbeeffectivenotwithstandingsuchaclause.ThereisalsothedecisionofSteelJtothis
effectintheWorldOnlineTelecomcase:see[104]above.
107.Thereare,moreover,otherdecisionswhichsupporttheapproachtakenbySedleyLJintheWorldOnlineTelecomcaseandfavouredbyGlosterLJandStuartSmithJinEnergyVentureandVirulite.Forexample,inLiebevMolloy(1906)4
CLR347theHighCourtofAustraliaconsideredabuildingcontractcontainingaclausethatextraitemsshouldnotbepaidforunlessorderedinwriting.GriffithCJ,deliveringthejudgmentoftheCourt,stated(at354)thatnotwithstanding
theclause,theconductofthepartiesmaymeanthatanimpliedcontracttopayfortheextraitemsistobeinferred.Thisisaquestionoffact.Thus,anoralagreementortheconductofthepartiestoacontractcontainingsuchaclausemay
giverisetoaseparateandindependentcontractwhich,insubstance,hastheeffectofvaryingthewrittencontract
108.(iii)Questionsofproof:WhatofMrDownes'sconcernaboutmanufacturedallegationsoforalagreements?IntheWorldOnlinecase,SchiemannLJrecognisedthisargumenthadforce,butagreedwithSedleyLJastotheoutcome.
Moreover,itappearsfromSchiemannLJ'ssummaryofthesubmissionsonbehalfoftheunsuccessfulrespondentinthatcase(at[17])thatcounselhadacceptedthatthepurposeofan"antioralvariation"clause"isnottopreventthe
recognitionoforalvariations"butonlytoprevent"casualandunfoundedallegations"ofvariation.
109.Difficultiesofproofmayarisewheneveritisclaimedthatacontracthasbeenmadeorallyorbytheconductoftheparties,andthefactshavetobedeterminedbythetrialjudgefromtheevidencegivenbythepartiesandtheirwitnesses.In
theEnergyVenturePartnersandVirulitecasesreferredtoat[105]aboveGlosterLJandStuartSmithJconsideredthestatementsofHHJMackieQCinSpringFinanceLtdvHSRealCompanyLLC[2011]EWHC57(Comm)at[53]and
inthesummaryjudgmentdecisioninthiscase([2012]EWHC3134(QB)at[33])thatthecourtwouldbelikelytorequire"strongevidence"beforefindingtherehasbeenanoralvariationofsuchaclause.Inthefirstofthesecases,Gloster

LJ'sinclinationtoregardanoralvariationaseffectivenotwithstandingsuchaclausewasstatedtobe"wheretheevidenceonthebalanceofprobabilitiesestablishedsuchvariationwasindeedconcluded".StuartSmithJwasofthesame
viewinthesecondcase:see[2014]EWHC366(QB)at[60].SeealsoMcKayvCenturionCreditResourcesLLC[2011]EWHC3198(QB)at[56].Irespectfullyagreewiththem.
110.(iv)Precedent:NotwithstandingtheargumentsofprincipleandthestatementsinthecasestowhichIhavereferred,isthisCourtboundbyUnitedBankLtdvAsifandwastheWorldOnlineTelecomcaseperincuriamtheearlierdecision?
TherearetwopotentialreasonsfornotregardingthiscourtasboundbytheUnitedBankcase.Thefirst,whichwascanvassedatthehearing,istheexceptionidentifiedbyBuxtonLJinR(Kadhim)vBrentLBCHousingBenefitReview
Board[2001]QB955andappliedinRawlinsonandHunterTrusteesSAandTchenguizvDirectoroftheSeriousFraudOffice[2014]EWCACiv1129at[43][44]andRaynervLordChancellor[2015]EWCACiv1124at[48].Idonot
considerthattheKadhimexceptionappliestotheUnitedBankcase.BuxtonLJstated(at965)thatitappliesonlywherethepointhadnotbeenthesubjectofargumentbefore,orconsiderationby,thecourt.Healsostated(at966)thatthe
exception"mustonlybeappliedinthemostobviousofcases,andlimitedwithgreatcare".AlthoughitisdifficulttoseefromeitherthefirstinstanceortheCourtofAppealdecisionsintheUnitedBankcasehowtheguarantorshadputthe
argumentthattheoralagreementwaseffective,thepointmusthavebeenthesubjectofargument.
111.Thesecondreasonfornotregardingthiscourtasboundbyapreviousdecisioniswherethereareinconsistentdecisionsofthiscourt.InsuchacasethefirstexceptiontotheruleinYoungvBristolAeroplaneCo[1944]KB718applies.
ThisCourtisnotboundbyeitherdecision,andisentitledtodecidewhichtofollow.InmyjudgmenttheUnitedBankcaseandtheWorldOnlineTelecomcaseareinconsistent.
112.ThereisafurtherreasonthatthisCourtisnotboundbyeitherdecision.ThisisthattheCourtintheWorldOnlineTelecomcaseappearstohaveactedinignoranceoftheUnitedBankcase.InYoung'scasetheCourtalsostated(at729)that
casesinwhichthecourthasactedinignoranceofapreviousdecisionofitsownareoneoftwoclassesofdecisionsperincuriamwhichfelloutsidethescopeofitsinquiry,andthat"asubsequentcourtmustdecidewhichofthetwo
decisionsitoughttofollow".ThereistheadditionalcuriosityinthiscasethatintheUnitedBankcasetheCourtsimplyadoptedtheapproachofSedleyLJwhenrefusingpermissiontoappealonthepapers.
113.Asbetweentheapproachesinthetwocases,theconsiderationsofprincipletowhichIhavereferredleadmetoprefertheapproachintheWorldOnlineTelecomcasewhichrecognisedthatinprincipleacontractcontainingaclausethatany
variationofitbeinwritingcanbevariedbyanoralagreementorbyconduct.Ialsoobservethat,asBuxtonLJstatedinR(Kadhim)vBrentLBCHousingBenefitReviewBoard[2001]QB955at965,itisthereasonsandnottheoutcome
thatdeterminethestatusofadecision.IntheUnitedBankcaseThorpeLJ'sjudgmentonthispointeffectivelyconsistedofanaprioriproposition.NeitherhenorWrightJappeartohaveconsideredanyauthorityontheeffectivenessofan
oralvariationofacontractcontaininga"nooralvariation"clause,thepositionoforalvariationsofdeeds,ortheapplicableprinciplesofcontract.Bycontrast,(see[104]above)intheWorldOnlineTelecomcasetheCourthadthebenefitof
bothtextbookandjudicialsupportfortheapproachofthesuccessfulrespondent.
114.(v)WasitopentothejudgetofindthattheconductofthepartiesmeansthattheAgreementwasvariedbymakingPortoaparty?Ihavesummarisedthejudge'sapproachat[52]above.Inmyjudgmenttherewasampleevidenceto
justifyhisconclusion.ThisincludedthefactthatTRWLucas'spositionmeantthatPortowouldhavebeenentitledtoignorewarrantyclaimsonthegroundtherewasnocontract(whichithadnot).Idonotconsiderthattheambiguitiesin
someofthedocumentsandtheevidence,whichthejudgerecognised,precludedhimfrommakingthefindingthatPortowastreatedasapartytotheAgreement.Inmyjudgmenthewasentitledtoconcludethat,onthebasisof"open,
obviousandconsistent"dealingsoveralongperiod,therewasnootherexplanationbutthatthepartiesintendedtoaddPortoasapartytotheAgreement.Accordingly,PortohasarightofactionagainstTRWLucas.
VII.Conclusion
115.ForthereasonsIhavegiven,ifmyLordsagree,theappealwillbeallowedonground1.
LordJusticeUnderhill:
116.IagreewithBeatsonLJ'sconclusionandreasoningonground1andthusthattheappealshouldbeallowed.Asregardstheotherissues,Iagreethatweoughttoexpressaconsideredviewontheissueoflawraisedbyground6,even
thoughitisformallyunnecessarytodoso,inviewoftheconflictofauthority.AlthoughintheendIampersuadedthatthedecisionofthisCourtinWorldOnlinewascorrectandshouldbefollowed,forthereasonsgivenbyBeatsonLJ,I
mustconfesstohavingfeltsomehesitationinreachingthatconclusion(whichitappearsthatIsharewithSchiemannLJinthatcase:seehisjudgmentat[17]).Itseemstomeentirelylegitimatethatthepartiestoaformalwritten
agreementshouldwishtoinsistthatanysubsequentvariationshouldbeagreedinwriting(andperhapsalso,ashere,insomespecificform),asaprotectionagainsttheraisingofsubsequentillfoundedallegationsthatitstermshavebeen
variedbyoralagreementorbyconduct:eventhoughillfounded,suchallegationsmaymaketheobligationsunderthecontractmoredifficulttoenforce,mostobviouslybymakingitmoredifficulttoobtainsummaryjudgment.Butthe
argumentsinfavourofaflexibleapproacharealsostrongandintheend,evenifitweredesirabletotreatprovisionsofthiskindasentrenched,Icannotseeadoctrinallysatisfactorywayofachievingthatresult.Ihaveconsideredwhether
theremightbesomekindofhalfwayhouse,whichmadeitformallymoredifficultforapartytoestablisha"nonconforming"variationbutnonewassuggestedinargumentandIcannotseeanythatwouldbeofrealisticvalue.
117.ItdoesnotfollowthatclauseslikethesecondsentenceofArticle6.3havenovalueatall.Inmanycasespartiesintendingtorelyoninformalcommunicationsand/oracourseofconducttomodifytheirobligationsunderaformallyagreed
contractwillencounterdifficultiesinshowingthatbothpartiesintendedthatwhatwassaidordoneshouldaltertheirlegalrelationsandtheremayalsobeproblemsaboutauthority.Thosedifficultiesmaybesignificantlygreaterifthey
haveagreedtoaprovisionrequiringformalvariation.
LordJusticeMooreBick:
118.IalsoagreethattheappealshouldbeallowedforthereasonsgivenbyBeatsonLJ.Itis,perhaps,apitythattheonlyquestionofgeneralimportancethatarisesinthiscase,namely,whetheritwasopentothepartiestovarytheAgreement
orallyorbyconduct,shouldbeonethatitisunnecessaryforustodecide.However,thematterwasfullyarguedand,giventhedifferingviewsthathavebeenexpressedinpreviousdecisionsofthiscourt,Iagreethatweshouldstateour
ownconclusionsonit.
119.Forthereasonshegives,IagreewithBeatsonLJthatArticle6.3doesnotpreventthepartiesfromvaryingtheAgreementorallyorinanyotherinformalmanner.Thegoverningprinciple,inmyview,isthatofpartyautonomy.The
principleoffreedomofcontractentitlespartiestoagreewhatevertermstheychoose,subjecttocertainlimitsimposedbypublicpolicyofthekindtowhichBeatsonLJrefers.Thepartiesarethereforefreetoincludetermsregulatingthe
mannerinwhichthecontractcanbevaried,butjustastheycancreateobligationsatwill,soalsocantheydischargeorvarythem,atanyratewheretodosowouldnotaffecttherightsofthirdparties.Ifthereisananalogywiththeposition
ofParliament,itisintheprinciplethatParliamentcannotbinditssuccessors.
120.Icanseetheforceofthesuggestionthattheremightwellbepracticalbenefitsinbeingabletorestrictthemannerorforminwhichanagreementcanbevaried,butlikeUnderhillLJIdonotthinkthatthereisaprincipledbasisonwhich
thatcanbeachieved.AclausesuchasArticle6.3inthiscasemayhaveconsiderablepracticalutility,ifonlybecauseitislikelytoraiseinanacuteformthequestionwhetherpartieswhoaresaidtohavevariedthecontractotherwisethan
intheprescribedmannerreallyintendedtodoso.Asamatterofprinciple,however,Idonotthinkthattheycaneffectivelytietheirhandssoastoremovefromthemselvesthepowertovarythecontractinformally,ifonlybecausetheycan
agreetodispensewiththerestrictionitself.NordoIthinkthisneedbeamatterofconcern,giventhatnothingcanbedonewithouttheagreementofbothpartiesandifthepartiesareinagreement,thereisnoreasonwhythatagreement
shouldnotbeeffective.

121.Ineedsaynothingmoreabouttheexistingstateoftheauthorities,whichhasbeenfullyexpoundedbyBeatsonLJinhisjudgment.IagreethatthedecisionsinUnitedBankLtdvAsifandWorldOnlineTelecomLtdvIWayLtd[2002]
EWCACiv413areinconsistentandthatthiscourtmustdecidewhichofthemitshouldfollow.IagreethatthedecisioninWorldOnlineistobepreferredforallthereasonshegives.
BAILII:CopyrightPolicy|Disclaimers|PrivacyPolicy|Feedback|DonatetoBAILII
URL:http://www.bailii.org/ew/cases/EWCA/Civ/2016/396.html