#6704 - Ministry Of Sound Ltd V. World Online Ltd. - Commercial Remedies BCL

The claimant (“Ministry of Sound”), is one of a group of companies operating nightclubs under that name. The defendant (“World Online”) is an internet service provider which in February 2000 wished to attract custom by associating itself with the Ministry of Sound brand.

The agreement was to last for two years. One of its main features was that Ministry of Sound was to package and distribute “Access CDs” which had been produced by World Online. Another was that it required Ministry of Sound to maintain on its website a branded Internet service (“the Branded Service”), based in part on services provided by World Online, which was to be available via the Access CDs to end users who had contracted with World Online.

In the first six months of the Agreement, World Online produced some 650,000 Access CDs but then, according to Ministry of Sound’s solicitors’ letter of 5^th September 2001, stopped providing them in August 2000, saying however that another Access CD would be produced for the second year. This is not disputed in the later correspondence. World Online continued to pay the amounts due under the agreement, although not always promptly.

On 22^nd August 2001, a company called Tiscali UK Limited wrote on behalf of World Online to Ministry of Sound, alleging substantial breaches of the agreement based on assumptions that it required Ministry of Sound to incur specific levels of expense, account for its expenditure and evidence its promotional activities, and requiring such breaches to be remedied within 30 days.

On these facts, Ministry of Sound sought summary judgment for the last instalment of 200,000 on the simple ground that, World Online’s repudiation not having been accepted, the agreement remained enforceable in accordance with its terms. World Online did not allege in its Defence that it was entitled to terminate the agreement because of Ministry of Sound’s breach. Its position was summarized in paras. 11 and 13 of the Defence, where it is submitted the obligation to make the staged payments “did not arise until and/or was related to Ministry of Sound’s performance of its obligations … and/or did not survive the release … from its obligations to perform those obligations” and that its own failure to supply the Access CDs after August 2000 amounted to a repudiation of the contract “which Ministry of Sound had no option but to accept”. It is however now accepted that Ministry of Sound was not obliged to accept the repudiation instead, it is contended, in reliance on Decro Wall International S.A. v. Practitioners in Marketing Ltd. [1969] 1 W.L.R. 361 at 371E–G per Salmon L.J., that its remedies were restricted to damages.

Having decided that the issue in this case cannot be resolved by reference to clause 13, it is necessary to revert to World Online’s main submission that this is a straightforward case in which Ministry of Sound has been prevented by World Online’s breach from performing its side of the bargain and that I should simply apply White and Carter and later authorities in which it has been followed, which are of course binding on me, and hold that it cannot sue for the remuneration due under the agreement. It does not seem to me to be quite so simple.

The contracts in both Langford and White and Carter were contracts containing entire obligations. The contractor was not entitled to be paid on specific dates. Their right to payment was dependent on the prior completion of specific contractual obligations, namely the display of advertisements. Therefore, if the advertiser had been in a position to prevent the display of advertisements, for example, by withholding material which was to form part of the advertisements, in the absence of a decree of specific performance, which the court would not have granted, the contractor could not fulfil the contractual pre-condition to payment. This would be so whether the advertiser was seeking to terminate the contract or was merely delaying it for some reason.

I do not think that Lord Reid can be taken as having expressed a general principle of such width applicable to all contracts. The words “and earn the contract price” are equally important and in my view the question is whether the innocent party can, without the other party’s assent or co-operation, do whatever the contract requires him to do in order to be entitled to the sum which he is claiming. Whether this involves the performance of all or any outstanding obligations depends on the terms of the contract and the operation of the principle of dependent provisions.

For example, if in Langford the initial advertisement had, appeared, entitling the contractor to the first quarterly payment, but the advertiser had then repudiated the contract and withheld co-operation which was essential to subsequent advertisements, the contractor would have been entitled to the payment even if he had accepted the repudiation, because in accordance with the express terms of the contract it fell due before termination. A fortiori, this would be so if he does not accept the repudiation.

To take another illustration, suppose in White and Carter the advertiser had been able to prevent performance on some sites, for example because they were on his land, to which he could refuse admittance, but not on other sites, there seems to be no reason why the contractor should not have displayed the advertisements where he was able to, and claimed the contractual price of 2s per week for those advertisements, and damages in respect of the others if he could prove loss.

In the present case, the relationship between the payments due and the services to be rendered is more nebulous. Clearly, the payments represent the price payable for the performance of the ongoing contractual obligations, which are partly but not entirely related to the Access CDs. But, as counsel for Ministry of Sound submits, they are due on specified calendar dates and not (as in both Langford and White and Carter) dependent on the prior performance of specific contractual obligations. The obligations themselves cannot easily be related to particular dates or periods within the term of the contract. For example, it is not clear when the Access CDs were to be made available, or in what quantities, and it may well be that the parties did not expect them to be ready by the time of the earliest quarterly payment dates.

In essence, the principle is that the breach of contract does not convert a dependent obligation into an independent one; if the right to the payment claimed is dependent upon the performance of contractual obligations, the prevention of performance by the other party’s breach of contract does not alter the position. Thus the matter depends upon the nature of the contractual right, not the circumstances of the breach, which is why counsel for World Online is in my view right to say that, if his argument is correct, the Ministry of Sound had no more right to the earlier instalments than it...