Abu Dhabi airline Etihad Airways and property developer Aldar
Properties agreed to sponsor the Force India Formula One racing
team when it was known as Stryker in 2007. Its deal included
bonuses for the team for points earned during the racing
season.
The team took on a new investor in the course of the season,
though, and its name was changed in November 2007 to Force India.
The new investor owned the Kingfisher beer and airline business and
its logo appeared on test cars during off-season testing between
the 2007 and 2008 competitions.
The team was permitted to negotiate with other potential
sponsors and offer Etihad and Aldar the opportunity to match any
deal or take a lesser display spot on the car's livery at the same
price if one was found.
According to the team, in January 2008 the team said that this
was its preferred option. Etihad told the team that a member of the
Abu Dhabi royal family was unhappy with the association with a beer
company.
Later that month Etihad said that the team's plan that it take a
lesser sponsorship spot was not acceptable and that it was
terminating the contract. It said that it had the right to do so
without notice because because the team's change of name was "a
blatant breach of our rights under the Sponsorship Agreement".
The High Court has said, though, that Etihad was too late in
objecting to that name change, that its behaviour in its aftermath
was that of a company that accepted the change. It had acquiesced
in the change, it said, and so lost the right to terminate the
contract without notice.
Its attempt to do so was a "wrongful repudiation of the
Agreement," said Sir Charles Gray in his ruling, and Etihad should
pay the team the bonuses it would have owed them had it continued
as their sponsor.
He said that if it had been worried by the various changes it
should have addressed them within the Agreement.
"Even if … the livery and/or the logo used by the Team during
winter testing did constitute material breaches of the Agreement,
it appears to me that those breaches were remediable in the sense
that the Team could have put matters right by reverting to the
previous livery and removing the Kingfisher logo for the remainder
of the winter testing," he said. "It follows that under the
Agreement E/A were obliged to give notice to the Team requiring the
breaches to be remedied."
"Not only did [Etihad] not complain of conduct which they now
assert to have been a material breach, but also they led the Team
to believe that they were happy with its performance of the
Agreement," said the judge. "I am in any event entirely satisfied
on the evidence that any breach of clause 3.1. or 3.2.4 of the
Agreement was waived or alternatively acquiesced in by E/A by
reason of their conduct after they became aware of the identity and
business interests of the new owners of the Team."
The ruling said that Etihad and its sponsorship partner Aldar
Properties were adopting a 'wait and see' policy to see what
advantage could be gained by the situation.
"In my judgment this is a case where [Etihad and Aldar], being
the party that had the right to terminate the contract, with
knowledge of the facts said to amount to breaches on the part of
the Team, acted in a manner which is consistent only with it having
chosen to affirm the Agreement," he said. "My finding is that E/A
by their course of conduct over the months detailed above had,
prior to the sending of the letter of termination, elected not to
exercise any right they might otherwise have had to terminate the
contract. By parity of reasoning the various breaches of contract
now relied on were waived by E/A or alternatively acquiesced in by
their conduct over that period."
The Court awarded the team $4.64 million in damages and $42,000
in interest.
Disclaimer: We hope you find OUT-LAW’s content useful. It’s prepared by the lawyers at Pinsent Masons. Please remember, though, that it’s intended as general information only. It’s not legal advice. If that’s what you’re seeking, please
contact us. See also: our
full disclaimer
