Baird Textile Holdings Ltd v Marks & Spencer Plc
Court of Appeal
Citations:  EWCA Civ 274;  1 All ER (Comm) 737;  CLC 999;  CLY 931.
Baird supplied clothing to M&S for 30 years. M&S would periodically make orders, but there was no written contract governing the long-term relationship between the parties. This was M&S’ standard practice at the time. They preferred to keep relationships with suppliers flexible. In 1999, M&S suddenly terminated their supply arrangements with Baird, effective at the end of the production season. Baird sued M&S on two grounds:
- There was an ongoing contract between the parties. This contract contained an implied term that reasonable notice was necessary to terminate the relationship. Terminating the contract without reasonable notice was therefore a breach of contract; or
- M&S was estopped from terminating the contract without reasonable notice.
Baird argued that a ‘reasonable period’ was three years. They claimed the profits lost for that three year period. M&S applied for summary judgment in their favour, on the grounds that the claim had no reasonable prospects of success. They argued that there was no ongoing contract between the parties. Each of their orders were individual contracts which terminated when complete. M&S therefore contended they were under no obligation to keep making orders.
- Was there a reasonable prospect of a court finding an implied contractual obligation requiring reasonable notice?
- Was there a reasonable prospect of a court finding that M&S was estopped from terminating the contract without reasonable notice?
The Court of Appeal held in favour of M&S. The implied ongoing contract proposed by Baird was too uncertain. There was no objective way of determining what the parties had agreed in terms of the quantity or prices of the products. This strongly indicated that the parties did not intend to have an ongoing legal relationship.
The court also noted that even if there was an estoppel in this case, it would not help Baird. Baird needed to establish that M&S was bound to keep acquiring clothing from them. However, promissory estoppel cannot establish positive obligations. There was therefore no reasonable prospect of either claim succeeding.
This Case is Authority For…
Contracts will only be implied by conduct if that implication is necessary and the terms proposed are sufficiently certain. The parties’ rights or obligations must be clear, or it must be possible to determine those rights and obligations by certain means or reference to objective criteria. Using language like ‘reasonable’ may provide objective means to determine the parties’ obligations, but not always.
Promissory estoppel cannot impose positive obligations. It cannot be used to create a positive cause of action: it can only be used as a defence. Promissory estoppel also requires the court to be able to state the parties’ rights with sufficient certainty.
The vaguer the terms proposed by a litigant, the less likely the court will find that the parties intented to be legally bound by those terms.