Tl;dr:

In Pharmapac (UK) Ltd v HBS Healthcare Ltd [2022] EWHC 23 (Comm), the High Court held that a customer was entitled to terminate a contract for the supply of facemasks when the supplier failed to deliver on time. The court interpreted the time for delivery as of the essence, even though there was no formal contract and an email only referred to ‘weekly’ deliveries.

Summary of Facts

The parties concluded the contract by email in March 2020. The contract was for the supply of a total of 5 million masks by ten weekly instalments. Delivery of the first batch was to be by a specified date with nine further “weekly” shipments with no specified date, or stipulation as to by when in each week delivery must be made. The contract did not specify the number of masks to be included within each shipment nor did it say that the time for delivery was essential, or a condition of the contract, or address the consequences of failure to deliver on time. Only the first instalment was delivered.

Court’s Decision

There is no presumption in law that stipulations whether the time for delivery is ‘of the essence’ of a commercial contract. Although commercial contracts are often interpreted in this way, whether time for delivery is of the essence is a matter of construction.

If time for delivery is of the essence, it means it it critical and a key condition of the contract which if breached or missed, entitles the other party to terminate the contract.

In this case, the market for the masks was volatile in the context of a developing pandemic, gaps in the market and what the judge referred to as a “scramble for supply”. Despite the vagueness of the emails, in particular the lack of clarity of what was meant by “weekly” delivery, and the supplier’s lack of control over its supply line in India, the judge concluded that time for delivery was of the essence.

The Judge went on to reject the supplier’s argument that the customer had delayed too long in accepting the supplier’s repudiatory breach and, as such, elected to waive its right to treat itself as discharged from further performance.

Section 10(2) of the Sale of Goods Act 1979 provides that whether time for delivery is or is not of the essence depends on the contract terms.

Although this judgment contains no new law, it is a highly topical illustration of this section in action as well as a reminder of the benefits, to both parties, of stating whether time for delivery is or is not a condition of the contract.

1. Don’t just use email when entering into contracts – have some written terms, a written contract.
2. If time is important – state it.
3. Consider having a lawyer to review contracts