Whilst most of our time is spent with members who have consumers with overly high expectations of their second-hand car purchase, we occasionally assist with those whose businesses have entered into a contract with service providers.
In the instant case, our member signed up for the supply of energy but ultimately did not proceed, which put them in breach of contract.
The contract set out the consequences of breach as either:
- Compensation for the supplier’s loss of commission; or
- A fixed sum of £750.
Our member received a letter of claim for breach for over £6,000. This being some £4,700 loss of commission plus VAT.
The supplier said they would settle for just over £4,000, but we told them no!
We do not believe the contract term can be enforced for loss of commission, for a number of reasons:
- There is no way of knowing what the loss of commission will be, and therefore no way of knowing the compensation due or how it will be calculated in the event of a breach.
- There is nothing to say that any loss of commission attracts VAT.
- There is a huge difference between the unknown loss sought at the time of breach and the fixed sum of £750.
- Crucially, the term does not state when one or the other becomes due. In other words, what triggers a loss-of-commission claim and what triggers the fixed £750? It is presumed the words “whichever is higher” were meant to be included, but they were absent.
We told the company that our member will pay £750 and no more. If that is not accepted, any legal claim will be defended on the basis that only nominal damages should be awarded, on the basis that no one knows what the loss of commission will be or how it will be calculated, and thus it is inequitable for the court to impose anything of real value for the breach.
This shows how important it is to get one’s terms right. We at Lawgistics are happy to interpret contract terms within our areas of knowledge. Ultimately, only a court can give a definitive ruling, but we are here if and when you need us.
If you have had the same issue or a similar problem, why not call our legal team at Lawgistics for guidance via our telephone helpline or casework service.
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