The appellant “BWT” had entered into a sponsorship agreement and became the team’s principal sponsor for the 2018 racing season. Sponsorship payments amounted to around €15 million per year, most of which were paid early in the racing season.
If BWT terminated the contract for convenience, a clause stated that the payments already made could be retained by the team. However, if termination occurred in other circumstances, the payments made would be pro-rated to the termination date, with a repayment obligation on the team.
The team encountered financial difficulties in February 2018. BWT continued to provide financial support, and the parties executed a deed of variation in May, with new repayment obligations if certain eventualities occurred. In July 2018 BWT terminated the sponsorship agreement under the termination for convenience provision.
The team went into administration and then liquidation. The liquidators rejected most of the appellant's proof of debt, in which it sought reimbursement of the advance payments.
At first instance judge concluded that the variation deed did not affect the termination provision within the main agreement. BWT appealed.
The Court of Appeal dismissed the appeal, holding that the first instance judge had considered the text and context of the agreement, and there had been no error in interpretation.
The contracts had been drafted by skilled lawyers. The variation deed did not create a wholly new payment regime, or create any new termination rights. The wording of the main agreement was clear, and the variation deed did not impact upon the termination for convenience clause within the main agreement.
BWT Aktiengesellschaft v Force India Formula One Team Ltd (In Liquidation)
Our content explained
Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.