Pleading iii: Shaw

[A]- Mr. Shaw does not need to pay any damage to Mr. Hobbs, as {i} the exclusivity
clause Mr. Hobbs is relying on is unfair, {ii} does not provide any specific relief or
damage for the breach of that clause.

1. In business contracts, an exclusivity clause typically grants one party the exclusive
right to provide certain goods or services to another party within a specified scope, such
as a particular geographic area, industry sector, or for a defined period. The earliest
example regarding exclusivity clause can be found in the case of Nordenfelt v. Maxim,
Nordenfelt Guns and Ammunition Co. [1894].1
There had been no specific damage or relief for the breach of the exclusivity clause. In
EE LTD v Virgin Mobile LTD(2023),2 English and Wales Kings Bench Division, Mrs.
Justice Joanna Smith DBE in her judgment affirmed on the para [100] that “
{manufacturer}EE contends that On VM’s interpretation of clause 34.5 {exclusivity
clause} ,’ EE would have no remedy at all’ for VM’s breach of the exclusivity clause,
depriving it of all contractual force and turning it in to a mere statement of intent. So, in
this regard Mr. Hobbs is not entitled to any kind of relief or damages while relying on the
exclusivity clause.

(I) A vertical relationship in a business contracts are a relationship that typically

describes that one party has a dominating position in the agreement than the other party
such manufacturers and distributors. From the facts provided, Hobbs oversees the overall
operation and growth initiative of the business while Mr. Shaw was just there for mere
implementation which establishes Mr. Hobbs position in this contract as a dominant
party.
Under the Competition Act 1998, article 1 provision 2(1)(b) Ss.2(b) and Ss2(d) provides
that the dominant party can not impose any restriction that completely cuts off the
competition or investment or finance for the other party.

And from the Competition Act’s Vertical Agreement Block Exemption order 2022
confirms under S.8 it’s provided that dominating party cannot impose such restriction
which turns out to be a hardcore restricting in manner of concluding the party with only
one supplier or source of goods. So, it clear that the clause was unfair in regards of
Competition Act 1998.

From the above-mentioned discussion, it’s clear that not only the clause was ambiguous
due to it is unclear nature regarding damages or reliefs but the clause was also a clear
abuse of dominant position in the agreement and thus the clause shouldn’t even stand in
the contract.
1
Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535
2
EE Ltd v Virgin Telecoms Ltd [2023] EWHC 1989 (TCC).
(II) From the facts another thing is clear that regarding the Exclusivity Clause, the clause
was unilaterally decided by Mr. Hobbs whole Mr. Shaw just implemented it rather than
having an independent discussion on it. We should also look upon the recent Court Of
Justice of European Union (CJEU)’s decision between Unilever and The Italian
Competition Authority, where CJEU ruled that,
“where exclusivity clauses are applied via distribution network, the distributors use of
such clauses should be imputed to the dominant company if the clauses were unilaterally
decided by the dominant company and simply implemented through its distributors,
rather than being independently adopted by them.” So, it’s totally certain that the clause
wasn’t just unfair but it’s also had been a showcase of abuse of a dominant position.

1. Mr. Shaw was also going through economic hurdles. The exclusivity clause puts an
obligation to have Mr. Hobbs as his sole supplier. As,Mr. Shaw was completely
dependent for his business to Mr. Hobbs when Mr. Hobbs went through a loss due to the
overwhelming decking in wrench sale Mr. Shaw had terrific effect to his business and
was going through a loss. From the decision of Northamber PLC v Genee World Ltd
and other-20223 in EWHC Chancery Division, Judge Rawlings sitting as High Court
Judge stated that “In any event supplying resellers in the UK in order to survive, the
distributors can have other suppliers, even if such supplies did constitute a breach of
exclusivity clause”
As due to the abusing nature of the clause Mr. Shaw was at the verge of losing his
business it was justifiable for him to go for other suppliers to survive.

1. The damage is not linked with the breach;

(I) It’s clear from the fact that Mr. Hobbs hadn’t went through any loss due to Mr. Shaw
having another supplier and as as Mr. Hobbs suffered no loss there is no legal cause for
Mr. Hobbs to ask for damages.Even Mr. Shaw went over and above to make sure that Mr.
Hobbs doesn’t face any loss.
(III) From the decision in EE LTD v Virgin Mobilf Ltd (above) of para [44],4 “ I am
fortified in this view by the decision of Leggatt J (as he then was) in Yam Seng Ptd Ltd v
International Trade Corp Ltd [2013] EWHC 111 (QB) at [177]-[185].5

As Leggatt J explained, a claimant is not entitled to damages for breach of an exclusivity

obligation on the expectation measure if it cannot “prove what profit it would have made

3
Northamber Plc v Genee World Ltd & Ors [2020] EWHC 31
4
EE LTD v Virgin Mobilf Ltd (above) of para [44]
5
Yam Seng Ptd Ltd v International Trade Corp Ltd [2013] EWHC 111 (QB) at [177]-[185].
or indeed that it would have made a profit at all if [the party in breach] had fully
performed its obligations under the agreement”. _ BOSS LINE

A claim for “loss of revenue” that does not give credit for the costs incurred by the
claimant so as to reflect only the claimant's loss of profit plainly falls foul of the
expectation measure and the overriding compensatory principle.”
Mr. Hobbs had suffered no loss due to any breach even if it happened as his wrenches
had been sold and Mr. Shaw has helped him to recover in business so Mr. Hobbs isn’t
entitled to any kind of Damages.

(II) The damage isn’t identifiable. Even if any breach happened to the exclusivity clause
there is no evidence that Mr. Hobbs had suffered any loss. In Lord Bingham’s decision in
White Arrow Express LTD V Lamey’s Distribution LTD [1996]6 he stated that, “ The
Robinson v Harman formulation assumes that the breach has injured the party’s financial
position; if he can not show that it had, he will recover nominal damage only” There has
been no evidence that Mr. Hobbs has faced any loss or had any adverse financial effect
due to the decision of Mr. Shaw and it’s clear that it had no financial effect as Mr. Shaw
completed his duty to sell 100,000 wrenches so there had been no damage faced by Mr.
Hobbs.

(II) There was no communication regarding the breach of the exclusivity clause. Even if
any breach happened, Mr. Hobbs had a duty to communicate regarding the breach From
the facts, it’s clear that Mr. Hobbs did not communicate with Mr. Shaw regarding the
issues. In the case of Vitol SA v Beta Renowable SA [2017]7 Lord Steyn in his judgment
conveyed that the innocent party must communicate his decision to the party in breach
and the communication must clearly and unequivocally convey to the repudiating party.

As. Mr. Hobbs did not communicate he is not entitled to damages.

Mr. Hobbs also affirmed the contract. From the facts, it’s clear that Mr. Hobbs waited for
Mr. Shaw to finish the variation of the contract, which shows that Mr. Hobbs accepted
further performance of the contract and has affirmed the contract. According to the case
of, Davenport v The Queen-1877,8 “An innocent party who accepts further performance
after the breach of the contract, held there by to have affirmed the contract.”

Shaw 4:

The high court gave judgment by saying Mr. Hobbs does not have to pay damages to Mr.
6
White Arrow Express Ltd v Lamey's Distribution Ltd [1996] Trading LR 69
7
Vitol SA v Beta Renowable SA [2017] EWHC
8
Davenport v The Queen (Queensland) Privy Council
Shaw in relation to the warehouse repairs. We submit that. [i] there was no acceptance of
the offer of making the floor with inferior material [ii] There was misrepresentation
regarding the material of the floorings. [iii] There was tort of negligence.

[i] Mr. Shaw never accepted the offer of making the floor with inferior material.

Acceptance is the final and unqualified expression of assent to terms proposed by the
offeror.9 Acceptance should follow the ‘mirror image rule’, as there needs to be a mirror
image acceptance of the offer. An acceptance must exactly match all the terms offered.10
Mr. Shaw did not accept the offer of making the floor with the inferior material.
The general rule is that acceptance of an offer will not be implied from the mere silence
on the part of the offeree.11 Though silence can be a form of acceptance in this matter.
One can accept the offer by remaining silent but the offeror has to mention that he is
accepting the offer by the conduct of the offeree for being silent.12 But there was no
conduct form Mr. Shaw. In the general rule acceptance can be made by conduct.
It must be demonstrated that the offree acted with the objectively judged intention of
accepting the offer for the activity to be considered an acceptance.13 Here, Mr. Shaw was
not clear about the changes because Mr. Shaw relied on the representation of precision
Builders. Even if Mr. Shaw accepts through conduct, it can not be valid acceptance
because there was a misrepresentation by Mr. Hobbs.

Also, there was no communication for the acceptance. mere mental assent is not
sufficient.14 The offeree is assenting to an offer in his mind only and not communicated it
to the offeror.

[ii] There was misrepresentation regarding the material of the floorings.

Misrepresentation is a false statement of fact, which is addressed to the party misled,
whilst not being a term of a contract, which is material and induces the other party to
enter the contract and it was relied upon. to consider a misrepresentation it should fulfill
all the requirements of a misrepresentation:
(a) firstly. there has to be an unambiguous statement of fact which was false.15 This false
statement must be material, meaning it influences the decision of the other party, and the
other party must reasonably rely on it. Here, the false statement was that precision
builders assured that the use of urethane-based flooring does not compromise on quality
9
Hyde v Wrench [1840] EWHC Ch J90
10
Gibson v Manchester City Council [1979] UKHL 6
11
Felthouse v Bindley [1862] EWHC CP J35
12
Rust v Abbey Assurance company. [1969]
13
Day Morris Associates v Voyce [2003] EWCA Civ 189
14
Entores v Miles Far East Corp [1955] 2 QB 327
15
McInerny v Lloyds Bank Ltd [1974] 1 Lloyd’s Rep 246; Avon Insurance plc v Swrie Faser Ltd
[2000] 1 All ER (comm) 573
or durability.
(b) secondly, after establishing the dispute statement it must be shown the statement was
addressed to the party misled indirectly. It can be addressed by the representator to a third
party with intention that it be passed on to the claimant.16 here, Precision builders was the
representor and Mr. Hobbs acted as an agent who passed it to Mr. Shaw.

( c) There was an inducement which will lead representee to enter into the contract. The
false statement Induced Mr. Shaw to enter into the contract. Also, the misrepresentation
had materiality and there was a reliance.17 There will be no reliance if the representee
does not reply on the misrepresentation but on his own judgment or investigation.18 But
even if the claimant has investigated, partial reliance on misrepresentation is sufficient.19
(d) There is no general duty to check a representation, Here, one of the technicians
informed Mr. Shaw of the slight abrasions seen on the flooring but the investigation
happened after the flooring was made and Mr. Shaw was already induced by the
misrepresentation. So, there was partial reliance.
The misrepresentation caused loss to Mr. Shaw because he will not be able to store any
wrenches for his business. Although there was a frustrating event for the destruction, but
the damages of the flooring could have been prevented if Precision Builders did not
compromise the quality and durability of the flooring.

Thus far we have proved that there has been a misrepresentation from Precision Builders
and Mr. Hobbs acted as an agent for Precision Builders. Now, Whether Mr. Hobbs is
innocent or not; the burden of proof for innocence is on Mr. Hobbs. Even if Hobbs proves
that it was an innocent misrepresentation from him as had “reasonable grounds to believe
and did believe up to the time the contract made that the facts represented were true” Mr.
Hobbs would still be liable for rescission under this case. Since a major alliteration has
happened with the flooring after the flood, rescission is not possible.
Now, Mr. Shaw will get rescission or damages in “lieu of rescission” under section 2(2)
of misrepresentation act 1967. The right to rescind the contract may be lost in
accordance with the section 2(2) of the misrepresentation act 1967 if the court decides to
grant the claimant damages rather than withdraw the contract. Court try to give some
logical option in this section.
In the case of Willam Sindall v Cambridge county council, the Court of Appeal found
that if there had been an innocent misrepresentation, damages would have been granted
rather than the contract being terminated under section 2(2).
So, Mr. Shaw damages will be awarded rather than the contract being canceled.

[iii] There was tort of negligence.

16
Commercial Banking Co of Sydney Ltd v R H Brown & Co [1972]HCA 24
17
Museprime Properties v Adhill properties [1990] 36 EG 114
18
Attwood v Small (1838) 6 CI & F 232
19
Edgington v Fitzmaurice (1885) 24 Ch D 459
The tort of negligence holds people or organizations liable for harm they cause by not
taking reasonable care. When someone breaks a duty of care they owe another person and
causes harm or damage that could have been avoided, this is called negligence.

The following elements will establish the claim of negligence:

Duty of Care: The duty can be owed to class or person. here, Mr. Hobbs and Precision
builders owed a duty of care to Mr.Shaw . A duty of care is a legal requirement to act
reasonably in order to avoid causing harm to others. In the case of, Junior v Veitchi and
Co[1983],20 the House of Lords ruled that the defendant was liable for negligent
misstatement and breach of duty of care in the installation of a concrete floor. The court
held that even though there was no direct contract between claimant and defendant, the
defendant owed a duty of care as it was reasonably foreseeable that claimant would rely
on defendants expertise in the installation of the floor.

also, The judgment in Donoghue v Stevenson (1932),the court held that defendant, owed
a duty of care to claimant as a consumer of their product. This duty required defendant to
take reasonable care to ensure that their product was safe for consumption. This judgment
established the principle of negligence in the tort of negligence and had significant
implications for product liability and consumer protection laws.
here, Mr. Shaw was entitled to succeed in an action in tort because of the extremely close
relationship between Mr. Hobbs and Precision Builders. The crucial elements in the
relationship appear to be firstly, the fact that Mr. Shaw relied upon the skills of precision
builders to do the work and secondly, the fact that Mr. Hobbs assumed a responsibility
towards Mr. Shaw because of the structure of the contract.

Breach of Duty: Precision builders breached that duty by failing to act as a reasonably
prudent person. Where, Precision Builder used low quality material and there was a
misrepresentation from Precision Builders and Mr.Shaw[ii] This breach involved an
action or a failure to act when there was a duty to do so.

Causation: The breached caused the damage and it is a legal causation. The harm was a
reasonably foreseeable consequence of Precision Builders’ actions. Because Precision
Builders were experts and they know that the location of the warehouse in a humid town
and low-quality material will not be sufficient for the flooring. In the case of Esso
Petroleum Co Ltd v Mardon [1976],21 The court found in favor of claimant, holding that
the defendant had a duty of care to provide accurate information and had breached this
duty by providing misleading estimates. Since warehouse flooring material was not
durable which caused the damage. And Mr. Shaw will not be able to use the warehouse in
future for the damage. The warehouse has been commercially unusable.

20
Junior v Veitchi and Co Ltd [1983] 1 AC 520
21
Esso Petroleum v Mardon [1976] QB 801
Mr. Hobbs is vicariously liable for Precision Builders damage. Because Mr. Hobbs haired
Precision Builders. In the case of Various Claimants v. Catholic Child Welfare Society
[2012],22 The Supreme Court clarified that in certain circumstances, such as where a
special relationship exists between the parties or where there is an assumption of
responsibility, an entity may be vicariously liable for the negligence of another party,
even if there is no direct employment relationship.

Damages: here, Mr. Shaw suffered actual damages as a result of the Precision builders
and Mr. Hobbs breach of duty. These damages can include property damage of the
warehouse, commercial loss, and or emotional distress for not being able to continue to
use the warehouse.

22
Various Claimants v. Catholic Child Welfare Society [2012] UKSC 56