Affirmation Keeps All Obligations Alive: Cumulative Delivery and Net Availability under EXW Instalment Sales
Commentary on Advanced Multi-Technology for Medical Industry (t/a Hitex) & Ors v Uniserve Ltd [2025] EWCA Civ 1212 (CA)
Introduction
This Court of Appeal decision arises from two contracts concluded at the height of the Covid‑19 pandemic for the supply of 80 million Type IIR surgical masks and a related commission agreement. The seller, a Jordanian manufacturer trading as Hitex, experienced difficulties meeting delivery schedules. The buyer, Uniserve Ltd, terminated the supply contract; Hitex claimed unlawful termination and sought substantial damages for non‑acceptance under section 50 of the Sale of Goods Act 1979. A connected commission claim was brought by intermediaries Mr Popeck and Caramel Sales Ltd. At first instance, a Deputy High Court Judge awarded the seller over US$16 million, on a basis not pleaded, and dismissed the commission claim.
On appeal, Males LJ (Phillips and Snowden LJJ agreeing) allowed the buyer’s appeal, dismissed the seller’s damages claim, and dismissed the commission appeal. The judgment crystallises several important principles:
- Procedural fairness: A trial judge must not decide a case on unpleaded grounds without giving the parties a fair opportunity to address them (Al‑Medenni; Satyam).
- Misrepresentation and reliance: Even in fraud, the presumption of inducement can be rebutted where the representee undertakes and relies on its own due diligence (The C Challenger; BV Nederlandse v Rembrandt).
- Affirmation and performance: If the innocent party does not accept an anticipatory repudiation, the contract remains alive for the benefit of both parties and the innocent party must continue to perform all obligations (The Simona; Frost v Knight). In an EXW instalment sale where time is of the essence for readiness (but not for collection), the seller’s obligations are cumulative.
- “Availability” means net availability: Stock reserved under binding local requirements (here, a 15% reserve for the Jordanian Government) is not available for delivery to the buyer and counts against the seller’s ability to perform.
- No “retendering” theory: A seller cannot recover damages for non‑acceptance on unfulfilled cumulative quantities by notionally re‑offering the same goods in successive instalments.
Summary of the Judgment
The Court of Appeal made four core determinations:
- The misrepresentation rescission defence failed because Uniserve did not rely on the Waller email; it relied on its own agent’s inspections and due diligence, knowing the email’s predictions were unreliable (paras 59–62).
- Hitex did not communicate acceptance of Uniserve’s 17 June 2020 repudiation; hence the contract continued. Under the revised schedule, Hitex had to maintain cumulative stock for deliveries. When Hitex could not meet cumulative obligations on 21 June and 5 July 2020 (once the 15% governmental reserve was accounted for), Uniserve was entitled to terminate on 11 July 2020 (paras 63–87).
- Hitex’s section 50 damages claim failed: it never had the outstanding cumulative quantities available and could not “retender” the same stock for successive instalments (paras 88–94).
- The commission appeal failed automatically because the supply contract was validly terminated and no further shipments were made (paras 97–99).
The Court also criticised the first‑instance judge’s procedural approach in deciding unargued points and misunderstanding evidence concerning the 15% reserve (paras 48–52, 78–86).
Detailed Analysis
1. Procedural discipline: Judges must not decide on unpleaded, unargued grounds
Males LJ reaffirmed a bedrock principle of the adversarial system: judges decide cases on the issues the parties have pleaded and argued. Departures create unfairness and uncertainty. The court cited:
- Al‑Medenni v Mars UK Ltd [2005] EWCA Civ 1041: Parties must identify issues so each can respond; the judge adjudicates on those issues alone (para 48).
- Satyam Enterprises Ltd v Burton [2021] EWCA Civ 287: Judges cannot decide on wholly unpleaded theories that first appear in the judgment (para 49).
- Egan v Motor Services (Bath) Ltd [2008] EWCA Civ 1002: It can be legitimate to alert the court pre‑hand‑down to fundamental errors to avoid unnecessary appeals (para 51).
The deputy judge erred by (i) deciding the misrepresentation issue on authority grounds contrary to the parties’ pleaded common ground, and (ii) deciding that Hitex accepted repudiation when that case was not pleaded by Hitex. The Court of Appeal’s censure is a pointed reminder to confine determinations to the pleaded case unless the parties are given a full opportunity to meet the point.
2. Misrepresentation: reliance, due diligence, and the rebuttable presumption even in fraud
The buyer’s rescission defence failed on the fact of reliance. The court applied and clarified the following:
- The C Challenger [2022] EWCA Civ 231: To rescind, the representation must have played a real and substantial part in inducing the contract; the court evaluates a counterfactual of what would have happened absent the representation (paras 55–57).
- BV Nederlandse Industrie van Eiprodukten v Rembrandt [2019] EWCA Civ 596: There is a strong evidential presumption of inducement in fraud, but it is rebuttable (para 54).
Here, Uniserve’s on‑the‑ground inquiries via Majlan contradicted the email’s projections. Uniserve knew the Waller predictions were unreliable before signing and chose to proceed with time‑of‑the‑essence protections, effectively hedging risk (paras 59–62). That factual matrix rebutted any presumption of reliance, regardless of whether the misstatement was fraudulent or negligent. The entire agreement clause excluding non‑fraudulent misrepresentations never became determinative because reliance was not established.
3. Termination rights, affirmation, and cumulative obligations under the revised schedule
The court’s core commercial law holding arises from orthodox anticipatory breach doctrine as applied to an EXW instalment supply with a revised delivery schedule:
- The Simona [1989] 1 AC 788: A wrongful repudiation does not end the contract automatically. The innocent party must elect to accept (terminate) or affirm (keep alive). If affirming, the contract is kept alive for the benefit of both parties; there is no “via media” by which the innocent party can suspend its own performance pending the other side’s return to compliance (paras 64, 66).
- Frost v Knight (1872) LR 7 Ex 111: An affirmed contract remains alive for all purposes, including exposure to supervening events that may justify termination by the originally repudiating party (para 65).
Hitex never communicated acceptance of Uniserve’s 17 June repudiation (para 67). Accordingly, the contract remained on foot and Hitex had to satisfy its own ongoing obligations measured against the revised schedule. Crucially:
- Time was of the essence for Hitex to have goods “ready for delivery” on the specified dates, but not of the essence for Uniserve’s collection (para 17).
- This made the obligations cumulative: unless and until the seller made time for collection of the essence, each subsequent delivery date required Hitex to have the total of all overdue instalments available (para 67).
Factually, once a 15% reserve for the Jordanian Government is netted off, Hitex could not meet the cumulative obligations on 21 June and 5 July 2020. That breach entitled Uniserve to terminate on 11 July 2020 (paras 79–87).
4. “Availability” means net availability when a mandatory local reserve applies
A key evidential issue was whether stock shown in Hitex’s Production Reports was “available” for delivery to Uniserve when 15% was reserved for the Jordanian Government under local regulatory requirements (paras 75–78). The Court held that:
- Hitex’s own witnesses confirmed a 15% reserve applied to stock in the warehouse, and that this reserve was not available to Uniserve unless and until released (paras 75–78).
- Therefore, the figures in the Production Reports must be reduced by 15% to determine net availability (paras 77, 80–81).
The deputy judge’s suggestion that everything was “available” unless and until requisitioned was a misunderstanding of the evidence and could not stand (paras 82–86). On the corrected analysis, Hitex fell short on 21 June and 5 July; Uniserve’s termination on 11 July was valid.
5. EXW tender and notice: what must the seller do?
Although not finally decided, the Court provided useful guidance on EXW terms and tender of performance:
- Benjamin’s Sale of Goods (12th ed.) suggests that for EXW, the seller must allow collection at the seller’s place, and “must also notify the buyer when the goods are ready for collection and indicate where they are to be collected” (paras 71–72).
- The Court doubted that notice is an inflexible rule in every case and emphasised that the requirement turns on the contract and the parties’ course of dealing (para 72).
- In practice here, the parties’ prior shipments involved a readiness email with invoice/packing list before collection, suggesting notice formed part of a proper tender (para 73). On that view, Hitex had not tendered the later instalments. However, because Uniserve had not distinctly put the case that way at trial, the Court preferred not finally to decide (paras 73–74).
The takeaway is a pragmatic one: under EXW, the seller’s best practice is to issue clear, timely readiness notices and accompanying documents consistent with prior practice to evidence tender and trigger the buyer’s collection/payment obligations.
6. Damages for non‑acceptance (Sale of Goods Act 1979, s.50): no “retendering” and no recovery for stock never available
Hitex’s damages theory was that it could “retender” the same masks for successive missed instalments, claiming in total for 77 million units. The Court rejected this submission unequivocally:
- If the seller affirms the contract after the buyer’s repudiation, the seller must continue to perform its own obligations, which here included maintaining the cumulative quantities for each subsequent date (paras 89–91).
- Time was not of the essence for collection; therefore, the seller could not discharge successive obligations by notionally recycling the same stock (para 91).
- As a matter of common sense and law, a seller cannot recover damages for non‑acceptance of quantities it never had available in the first place (para 91).
- “Stopping manufacture” did not constitute mitigation; one cannot mitigate future breaches by disabling future performance before they occur (para 92).
Because Uniserve was in any event entitled to terminate, the wider s.50 calculation issues (market availability, timing, quantum) did not arise on appeal (para 95).
7. The Commission Contract
The commission agreement remunerated Mr Popeck/Caramel per shipment by reference to UK arrival and customs clearance. Commission had been paid on 3 million masks shipped. The appellants sought commission or damages on the remaining masks. As the underlying supply contract was validly terminated and no further shipments occurred, the commission appeal inevitably failed (paras 97–99). The Court noted, without deciding, that in other factual scenarios, a calculation clause may be mere machinery and not necessarily preclude commission where the buyer wrongfully prevents shipments (para 98).
Precedents and Authorities Cited
- Al‑Medenni v Mars UK Ltd [2005] EWCA Civ 1041 — confines a judge to the pleaded issues and gives parties an opportunity to meet any new point (para 48).
- Satyam Enterprises Ltd v Burton [2021] EWCA Civ 287 — improper to decide on a theory wholly outside the pleaded issues (para 49).
- Egan v Motor Services (Bath) Ltd [2008] EWCA Civ 1002 — parties may, in a proper case, alert the court to a fundamental error in a draft judgment (para 51).
- The C Challenger [2022] EWCA Civ 231 — test for inducement; identifying the relevant counterfactual; presumption of inducement as a factual inference (paras 55–57).
- BV Nederlandse Industrie van Eiprodukten v Rembrandt Enterprises Inc [2019] EWCA Civ 596 — presumption of inducement in fraud is strong but rebuttable (para 54).
- Hayward v Zurich Insurance Co Plc [2016] UKSC 48 — inducement can exist despite doubts; applied by the judge but distinguished on the facts (para 60 citing trial paras 129–136).
- The Simona [1989] 1 AC 788 — election on repudiation; no “via media”; affirmation keeps all obligations alive for both sides (paras 64–66).
- Frost v Knight (1872) LR 7 Ex 111 — affirmed contracts remain alive for supervening justifications (para 65).
- Braithwaite v Foreign Hardwood Co [1905] 2 KB 543 — the “via media” approach rejected by the House of Lords in The Simona (para 66).
- Benjamin’s Sale of Goods (12th ed., 2024) — EXW terms: passing of property and seller’s notice obligations; distinguished between property and tender (paras 69–73).
- Sale of Goods Act 1979, section 50 — measure of damages for non‑acceptance (paras 33–34).
Legal Reasoning and How the Court Reached Its Decision
The court’s reasoning proceeds in a disciplined sequence:
- It corrected procedural missteps by the trial judge, reaffirming adversarial fairness (paras 48–52).
- On misrepresentation, it focused on reliance: The court credited the buyer’s due diligence over the pre‑contract email, thereby rebutting the presumption of inducement even if fraud were assumed (paras 59–62). This coherent application of The C Challenger underscores that where a commercial party knowingly proceeds with protective terms, reliance may be absent.
- On termination, it applied The Simona: absent an unequivocal acceptance, the seller was obliged to continue to perform. Because time was of the essence for readiness (not collection), the seller’s obligations were cumulative, and the seller’s net availability fell short once the 15% reserve was accounted for (paras 67–81). That breach entitled the buyer to terminate on 11 July 2020 (paras 81–87).
- On damages, it rejected the “retendering” theory as incompatible with affirmation and the non‑severable nature of the obligations; one cannot claim for quantities never actually available (paras 88–94).
- On commission, the claims fell with the supply contract; no further shipments meant no further commission (paras 97–99).
Impact and Significance
The judgment’s practical and doctrinal impact spans commercial litigation, commodity supply, and transactional drafting:
- Affirmation strategy: Electing to affirm preserves the possibility of the repudiating party later relying on the innocent party’s non‑performance. Sellers who keep a contract alive must ensure rigorous compliance with all cumulative obligations. Failure opens the door to valid termination by the other party.
- EXW best practices: While the Court did not finally rule on a universal notice requirement, parties should assume that, in an EXW arrangement, tender typically requires a clear readiness notice, accompanying documentation (invoice, packing list), and consistency with the parties’ course of dealing.
- “Availability” is net availability: Where stock is subject to mandatory set‑aside (government reserve, export controls), contractual availability is assessed net of such constraints. Sellers must manage and evidence compliance transparently; buyers can rely on the seller’s own records and witness evidence to establish shortfall.
- No “retender” damages: In non‑severable instalment contracts where collection time is not of the essence, missed instalments are not satisfied by re‑offering the same goods later. Damages for non‑acceptance hinge on actual tender and genuine availability.
- Misrepresentation reliance in sophisticated trades: Due diligence can rebut the inducement presumption even for fraudulent misstatements. Parties who proceed despite known risks should expect reliance arguments to fail unless they can show the statement still materially influenced the decision.
- Pleadings discipline: The appellate court’s censure of unpleaded determinations will resonate. Trial judges should not innovate dispositive theories post‑hearing; advocates should consider, in appropriate cases, flagging fundamental errors pre‑hand‑down.
- Commission drafting: Where commission is pegged to arrival/clearance, consider providing explicit triggers for accrual and consequences if the buyer’s breach prevents shipment. The court left open whether an “arrival” clause could be treated as mere machinery in other cases.
- Variation by email: Although not a point of principle, the court accepted that the delivery schedule was validly varied by email exchange (after the buyer abandoned its challenge). Parties should ensure that variation mechanics (including any NOM clause) are complied with, but this case illustrates the commercial court’s readiness to give effect to clear email variations.
Complex Concepts Simplified
- Time of the essence: When a term is “of the essence”, late performance is a repudiatory breach entitling termination. Here, time was of the essence for the seller’s readiness to deliver; it was not of the essence for the buyer’s collection (paras 17, 67).
- Anticipatory repudiation and affirmation: If one party renounces before performance is due, the other may accept (ending the contract) or affirm (keep it alive). Affirmation requires continued performance of the affirming party’s obligations; there is no halfway house (paras 64–66).
- EXW (Ex Works) terms: The buyer bears collection from the seller’s premises. Tender usually involves making goods available at the works and, in practice, notifying readiness and providing documentation. Property passing issues are distinct from tender and were not determinative here (paras 69–73).
- Cumulative obligations in instalment contracts: When collection time is not of the essence, missed instalments remain outstanding. The seller must have all overdue instalments available on each subsequent due date (para 67).
- Entire agreement clause and misrepresentation: Such clauses can exclude liability for non‑fraudulent misrepresentations but cannot bar remedies for fraud. In this case, reliance failed, so the clause was not the decisive battleground (paras 18, 61).
- Section 50, Sale of Goods Act 1979: Provides seller’s damages for a buyer’s wrongful non‑acceptance. If there is an available market, damages are prima facie the difference between contract price and market price at the time for acceptance. The seller must show actual tender/availability; one cannot claim for quantities never available (paras 33–34, 91–94).
Practical Guidance
- For sellers under EXW instalments:
- Issue prompt, documented readiness notices aligned with past practice; attach invoices/packing lists.
- If collection delays cause operational strain, serve a notice making time for collection of the essence (if contractually possible) rather than unilaterally stopping production.
- Track “net availability” where mandatory reserves or regulatory constraints apply; segregate and record reserved stock.
- Avoid relying on “retendering” the same stock; maintain cumulative availability or seek a formal variation.
- For buyers:
- Undertake and preserve due diligence records; they can rebut misrepresentation reliance claims.
- Expressly stipulate that time is of the essence for both readiness and collection if commercially required, and provide clear termination triggers.
- On termination, document the grounds with reference to net availability and any known reserves.
- For drafters:
- Clarify whether the contract is severable or non‑severable; specify cumulative or non‑cumulative obligations between instalments.
- Set out notification and documentation requirements for tender under EXW.
- Commission agreements: define when commission is “earned” and address thwarted shipments caused by breach.
- Include robust variation and NOM clauses—and follow them.
- For litigators:
- Plead election (acceptance or affirmation) explicitly and prove the communication of acceptance if relied upon.
- If relying on partial shipment damages (e.g., specific instalments met), plead and prove tender on those dates.
- Be alert to fundamental judicial errors at draft stage and consider raising them responsibly, consistent with Egan.
The Postscript and Its Lessons
After circulation of the draft appellate judgment, Hitex suggested it might yet be entitled to damages for the 14 and 28 June instalments, since those cumulative totals were arguably met even net of the 15% reserve (paras 79–80, 100). The Court rejected this late point as it had not been pleaded or argued below. Had it been live at trial, the tender/notice issue (paras 69–73) would have been squarely addressed. The episode underscores the need to plead alternative partial recovery routes early and to adduce evidence of tender consistent with EXW practice.
Conclusion
The Court of Appeal’s decision offers a clear, business‑savvy restatement of core principles with practical bite:
- Judges must not decide on unpleaded grounds; procedural fairness matters.
- In sophisticated commercial settings, due diligence can defeat reliance for misrepresentation, even where fraud is alleged.
- Affirmation keeps all obligations alive: in EXW instalment sales where collection time is not of the essence, the seller’s delivery duties are cumulative and assessed on net availability. Mandatory reserves reduce availability.
- There is no “retendering” workaround for damages under section 50; sellers cannot recover for quantities never available.
- Commission claims dependent on shipments will fall if the underlying supply contract is validly terminated and shipments cease.
Although built on orthodox foundations (The Simona, The C Challenger, Al‑Medenni), this judgment meaningfully clarifies how those doctrines operate in the realities of pandemic‑era supply chains, EXW logistics, and government‑mandated set‑asides. It will serve as a touchstone for future instalment‑delivery disputes, evidential assessments of “availability,” and the disciplined conduct of civil trials within the issues joined.
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