Clear Drafting = No Ambiguity (And Meant Duty Of Good Faith Did Not Apply To Termination At Will)

• Published date: 11 November 2022
• Subject Matter: Litigation, Mediation & Arbitration, Transport, Aviation, Trials & Appeals & Compensation
• Law Firm: Gowling WLG
• Author: Mr Tom Cox, Sean Adams and Teresa Edwards

The recent case of Optimares SpA (Optimares) v Qatar Airways Group QCSC (Qatar) has provided further illustration of the Court's willingness to give effect to contractual terms, where they are clearly drafted, particularly when parties have been assisted by skilled professionals in agreeing the bargain - even if that bargain is clearly a bad one for one side over the other.

The case also provides useful confirmation that express duties of good faith are unlikely to cut across express termination provisions. Clear drafting is required to allow such a provision to have effect - parties would need to expressly agree in writing that good faith should apply to a right to terminate.

In this article, we take a look at this case in detail.

Background

The dispute involved Purchase Agreements (the Agreements) entered into between Optimares and Qatar for Optimares to design, manufacture, sell and deliver economy and business class seats to Qatar for its aircraft.

Under the Agreements, the parties agreed that Qatar would place orders for shipsets (groups of seats for installation) by issuing purchase orders, governed by the terms of the Standard Conditions and the Agreements.

The parties had agreed that the time for delivery was of the essence and that Optimares had to meet applicable "on-dock dates" - with any orders for shipsets being placed no later than five months prior to the relevant on-dock date. The first on-dock date was 31 January 2020, but this date and subsequent dates were missed.

By March 2020 the relationship between Optimares and Qatar had broken down. Optimares gave notice to Qatar of excusable delay under the Agreements, asserting that the consequences of COVID-19 (and measures imposed by the Italian Government as a result) had made "all manufacturing and related processes effectively impossible" and had "removed the Supplier's ability to perform the Purchase Agreement in any meaningful fashion". Furthermore, it was "unable to provide a meaningful estimate as to when the Supplier [would] be able to resume its operations under the Purchase Agreement...".

In response, Qatar was said to be "completely uncertain" as to when any seats would be delivered and chose to exercise its right to terminate the Agreements for convenience in accordance with Clause 12.2.3. Under that clause, Qatar incurred no liability to Optimares and required Optimares to repay all sums previously paid to it to date under the Agreements.

The termination for convenience clause...