© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Contracts (general)
INTERACTION WITH OTHER AREAS OF LAW
Statutory regime applies to contractual relations determined under general law
"[139] This authority, like Morris v Baron and British and Beningtons, shows that the common intention of the parties governs the nature of the contractual arrangements between them. If a statutory regime then has to be applied, it is applied to the state of the contractual relations between them as determined under the general law in accordance with their common intention. Morris v Baron, British and Beningtons and Stead v Dawber illustrate the sort of three-stage analysis we have referred to above, which is different from that contended for by HMRC." (R (oao Cobalt Data Centre 2 LLP) v. HMRC [2024] UKSC 40)
"[23] Unlike some other relational arrangements including agency, the basis in law of employment is necessarily contractual. Rooted in the common law, it depends on the existence of a contract between employer and employee. For many years, some commentators have thought that it would be better based on the relationship itself (see, for example, BA Hepple: Restructuring Employment Rights (1986) 15 ILJ 69) but it has "obdurately persisted" in being based on the individual contract of employment (see Paul Davies and Mark Freedland: Changing Perspectives Upon the Employment Relationship in British Labour Law, Chap 6 in The Future of Labour Law (2004), ed. Catherine Barnard and others, at p 130).
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[26] As noted above, it is the common law concept of employment that is applicable to the tax and National Insurance legislation relevant to this appeal." (Professional Game Match Officials Ltd v. HMRC [2024] UKSC 29)
- Unless distinct statutory standard intended
"[125] The Variation Issue arises only on the footing, contrary to our opinion, that the phrase "incurred under a contract entered into [etc]" in section 298(1)(b) refers to the general law of contract and does not import any distinct statutory standard of its own.
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[150] We revert briefly at this point to the section 298 Issue. The difficulties and uncertainties involved in applying the general common law as regards treatment of a change in contractual relations as a variation or a replacement of an original contract are further reasons why it is not plausible to think that the legislative regime as regards what happens in the second 10 year period was supposed to operate solely by reference to common law theory. That would make this tax legislation too uncertain in its effect and would improperly elevate taxpayer choice as to how it should operate above implementation of the policy purpose behind the 10 year time limit." (R (oao Cobalt Data Centre 2 LLP) v. HMRC [2024] UKSC 40)
Unjust enrichment and contracts
- Contract excluding claims in unjust enrichment even where contract silent on situation (at least where it appears situation was considered)
"[69] In Barton at [89], Lady Rose cited the statement of Etherton LJ, as he then was, in MacDonald Dickens v Costello to the effect that the general rule should be to uphold the contractual arrangements by which parties have defined and allocated and, to that extent, restricted their mutual obligations. Such an approach is consistent with Lord Leggatt's approach and with the decision itself in Barton. In that case, the contract provided for payment in specific circumstances. Its silence as to the obligations on the happening of other events meant that no obligations arose save in the circumstances provided for. Lady Rose added that: "This excludes not only an implied contractual term but a claim in unjust enrichment." This is all the more so where there is a contractual term which governs the circumstances. Where the very circumstances are addressed in the contract, it seems to me that it is not possible to imply a different basis for the relationship between the parties. As Carr LJ put it in the Dargamo case:
"[133] . . . where the basis of the consideration is expressly and unconditionally spelt out on the face of a valid and subsisting contract, as here, there is no proper scope for inquiring into an alternative basis that is plainly contrary to the express basis freely agreed between the parties. . . ."
I cannot see that the position is different where the contract is at an end as a result of repudiatory breach." (Winros Partnership v. Global Energy Horizons Corporation [2026] EWCA Civ 654)
"[73] I agree. I would only add in relation to the Merits appeal that there may be circumstances where silence on a particular point leaves room that may be filled by a process of implication. That, however, is not this case. The basis of the contract included the provision in clause 14.3, which directly addressed the situation that would arise when Rosenblatt can end the agreement because its client does not meet its responsibilities. That situation arose here and clause 14.3 governs the parties' obligations notwithstanding Rosenblatt's strategic and tactical decision to terminate the contract by accepting their client's repudiatory breach. There is no silence and no basis for an assertion that the basis of the contract has failed." (Winros Partnership v. Global Energy Horizons Corporation [2026] EWCA Civ 654)
CONDITIONS PRECEDENT
- No duty on either party to render principal performance until occurrence of condition precedent
"[64]...Where an agreement is subject to a condition precedent, there is before the occurrence of the condition precedent no duty on either party to render the principal performance promised by him: see Chitty para 2-145." (Schweppe v. Harper [2008] EWCA Civ 442)
- Payment of deposit not interpreted as condition precedent to exercising option but obligation arising as a result of exercise
"[52] The Claimants submit that payment of the deposit required by Clause 4.2 was a condition precedent to the valid exercise of the Plot 2 Option. As illustrative examples in support of their submission they refer to Hare v Nicoll [1966] Ch 130 and, by way of contrast, Millichamp v Jones [1982] 1 WLR 1422. In Hare v Nicoll the option to repurchase shares stated that “… if the vendor shall before May 1, 1963, give notice in writing to the purchaser of his desire to repurchase [the shares] at the price of £[X] and on payment of the said sum of £[X] before June 1 1963 to the purchaser the vendor may at any time thereafter by deed revoke the trusts hereby declared… .” It was held that the two conditions (i.e. notice in writing and payment of £[X] by the respective specified dates) had to be strictly complied with for the option to be effectively exercised. By contrast, in Millichamp v Jones , two clauses of the option agreement provided that “3. The said option shall be exercisable by the intending purchasers giving to the intending vendor notice in writing ….” and “5. Upon the exercise of the said option the intending purchasers shall pay to the intending vendor’s solicitors as stakeholders by way of deposit £[x].”
"[53] I accept the submission, supported by Barnsley’s Land Options (6 th Edn) at 4-28, that “in all cases … it is necessary to consider carefully the form of words used and there are no general principles which will determine whether the deposit is actually payable as a condition precedent to the exercise of the option; each agreement must be construed individually.” In other words, normal principles for the construction and interpretation of commercial contracts in writing are to be applied. Adopting that approach, the conclusions that payment of the deposit was in Hare v Nicholl and was not in Millichamp v Jones a condition precedent to the effective exercise of the option may be seen to be almost self-evidently correct.
[54] Turning to Clause 4, both the terms and the structure of the clause lead to the conclusion that payment of the deposit was not a condition precedent to the exercise of the option. The terms are clear: the option is exercised by the Buyer giving written notice to the seller; and the deposit becomes payable “on the exercise of the option” (i.e. when the option is exercised) and not as part of the identified procedure for exercising it. The structure reinforces the clarity of the terms: Clause 4.1 says how the option is exercised; clause 4.2 creates a separate obligation that arises when the option is exercised. There is nothing in either the terms or structure that is analogous with the approach in Hare v Nicholl where, as set out above, two obligations linked by “and” (to show their concurrent necessity) were both subject to the initial qualifying “if”, which, as a matter of structure and syntax, showed them to be the conditions that together necessarily preceded the purchaser’s right to revoke the trusts." (Peacock v. Imagine Property Developments Ltd [2018] EWHC 1113 (TCC), Stuart-Smith J)
- Result not in party's control was a condition precedent
"[66] In important respects, this agreement is similar to an agreement for the sale of land "subject to finance". In Lee-Parker v Izzet (No 2) [1972] 1 WLR 775, there was an agreement for the sale of a house "subject to the purchaser obtaining a satisfactory mortgage". Goulding J held that this condition was a condition precedent to the existence of a binding contract and that the condition was void for uncertainty. He said at p 779H that the concept of a satisfactory mortgage was too indefinite to be given any practical meaning. "Everything is at large, not only matters like the rate of interest and ancillary obligations on which evidence might establish what would be usual or reasonable, but also those two most essential points---the amount of the loan and the terms of repayment".
[67] It seems to me that, although the agreement in the present case was not expressed as an agreement subject to a condition precedent, in substance that is what it was. The finance was a necessary, but not sufficient, condition of obtaining the annulment. Mr Papadopoulos submits that the loan was incidental to the annulment: the agreement was to obtain the annulment, not to obtain the finance. I have described the obtaining of the annulment as the "core" obligation. But the finance was an essential element of what the judge described as "the package" that the parties agreed that Mr Schweppe would provide. Without the finance, the annulment could not be obtained." (Schweppe v. Harper [2008] EWCA Civ 442)
- Intention for others to believe document was executed at an earlier date than it was is dishonest
“I start from the premise that an honest solicitor, finding a client of his or a person with whom he was associated in business wishing to backdate a document (a fortiori if the document was one to which he, the solicitor, was himself to be a party) would remonstrate and refuse to join in the document and, failing that deterring the person, would take particular pains to find out why it was that the person wished to do as he proposed and would then seek to dissuade the person from completing his plan.” (Daniels v. Deville [2008] EWHC 1810 (Ch), §29, Lindsay J)
BACKDATING
- Back-dating document in order to mislead may mean it is unenforceable
"[22] Whether the back-dating of the agreement had a material affect on the administration of justice is a separate question. An allegation that the agreement was deliberately back-dated in order to mislead the defendant or its solicitors or the court into believing that it was entered into on the date it bore, in order, for example, to give the impression that the uplift of 25 per cent had been agreed before there was an admission of liability, would be a serious allegation of impropriety (indeed, of dishonesty) which, if established, would certainly lead to the unenforceability of the agreement. However, the defendant has disclaimed any allegation of impropriety on the part of Mr Dench. The fact that the agreement had been back-dated was apparent from the files provided to Master Simons, and was noticed by him. In these circumstances, there is no basis for a conclusion that the agreement is unenforceable on the ground that its back-dating had a material effect on the administration of justice." (Holmes v. Alfred McAlpine Homes (Yorkshire) Ltd [2006] EWHC 110 (QB), Stanley Burton J)
- Document that identifies its backdating may be valid as between the parties to the document
“He states that as between Vinexsa and the other parties to the Nominee Agreement, Bahamian law would generally not operate to prevent the Nominee Agreement from taking effect from 11 June 2003 where this was expressed to be the intention of the parties, even if the agreement was actually executed after that date. I would also say that the same result would be obtained under English law – assuming that there was no intention to deceive anyone as to the actual date of execution. As the Nominee Agreement was expressed to be dated “as of” 11 June 2003, I find that there was no such intention. Whether the Nominee Agreement would have effect as regards third parties from 11 June rather than the actual date of execution is of course another question.” (Schechter v. HMRC [2017] UKFTT 189 (TC), §113, Judge Aleksander)
- Backdating only has effect as between parties to document/ no re-writing history
“When people enter into a deed of partnership and say that they are to be partners as from some date which is prior to the date of the deed, that does not have the effect that they were partners from the beginning of the deed. You cannot alter the past in that way. What it means is that they begin to be partners at the date of the deed, but then they are to take the accounts back to the date that they mention as from which the deed provides that they shall be partners. There is no sort of doubt at all that that is the only effect which such a deed can have. No deed can alter the past…” (Waddington v. O’Callaghan 16 TC 187 at 197, Rowlatt J).
“I prefer Ms Nathan’s submissions as I do not consider that the Bank of New Zealand case supports the proposition that a deed can be amended so that the amendments take effect from the date the deed was originally executed. Rather, the Bank of New Zealand authority was concerned with a different kind of “retrospective” amendment. The Bank of New Zealand concerned amendments to the rules of an unincorporated association which had a surplus of assets…the amendments had the effect of altering entitlements to share in a surplus from what had been supposed. However, the amendments did not seek to “re-write history”: they were not, for example, expressed to be backdated to a date before the amendments were made…It follows that I consider that the law is as stated in Waddington v O’Callaghan and I have concluded that the amendments made in the Deeds of Amendment and Rectification did not take effect from the date of execution of the original trust deeds.” (Always Sheet Metal Ltd v. HMRC [2017] UKFTT 198 (TC), §§152…153, Judge Jonathan Richards, emphasis original)