Terms Not Conditions

• Published date: 10 December 2020
• Subject Matter: Employment and HR, Contract of Employment
• Law Firm: Hill Dickinson
• Author: Elle Mackenzie

You have to pay even if the other party gives the game away

Court rules in Duchy Farm Kennels Ltd -v- Graham William Steels [2020] that even when one party in a contract breaches confidentiality clauses, the other party must continue to uphold all of their obligations.

Background

The background to this case lies in employment law.

Graham William Steels launched employment tribunal claims against his former employer, Duchy Farm Kennels Ltd (DFK). A settlement agreement was reached between the parties: DFK agreed to pay to Mr Steels 47 weekly instalments of '330, amounting to '15,500 in return for him dropping the claims. The agreement also included a confidentiality clause stating that the existence and terms of the agreement had to be kept completely private.

After DFK made around eight payments, it stopped all future payments when it transpired that Mr Steels had breached the confidentiality clause by revealing the settlement terms to a former colleague.

DFK insisted that the sums under the agreement were no longer recoverable due to this breach and when Mr Steels brought DFK to court to enforce the agreement, DFK defended the proceedings on this basis.

Outcome

The county court, which first heard the case, found that Mr Steels had indeed breached the confidentiality clause in the settlement agreement. Nonetheless, it rejected DFK's defence on the basis that the confidentiality clause was not a condition of the contract.

Where a contractual term is a condition of a contract, this means that it is vital and goes to the root of the contract. Where you breach a contractual condition, the other party can often terminate the contract and claim damages.

This outcome was supported in the High Court on appeal. The confidentiality clause was held to be an intermediate term of the contract.

Where a contractual term is an intermediate term of a contract, this means that the effect of a breach of that term needs to be considered before deciding on a remedy. Intermediate terms rarely go to the root of a...