February 18, 2016

That Porsche is mine


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In March 2011, Porsche enthusiast Kevin Hughes contacted a Porsche dealership to place an order for a new, limited-edition model of the Porsche 911 (Porsche had only allocated 30 of the new models to the UK), subject to price and availability. Mr Hughes paid a deposit of £10,000 on the basis that he would be first on the list if the dealership received any of the vehicles. At the time that the deposit was paid no vehicle, price or delivery date was specified.

The dealership was subsequently allocated one of the 911s from Porsche but sold it to a different customer. Mr Hughes brought a claim for damages for breach of contract. The claim was initially dismissed by the County Court on the basis that there was no contract but simply an agreement to agree. Additionally, it was held that even if there was a contract, there was no breach because there was a term in the dealership’s terms and conditions stating that it was not obliged to fulfil orders in the sequence in which they were placed.

Court of Appeal decision

Following an appeal by Mr Hughes, the Court of Appeal reversed the decision. It held that there was a contract between Mr Hughes and the dealership for the sale of a limited edition Porsche and additionally, a collateral contract (an additional contract outside of the main contract between the parties) that Mr Hughes would be first in the queue if Porsche supplied a vehicle to the dealership. The collateral contract overrode the term in the dealership’s terms and conditions giving it discretion to fulfil orders in any sequence it wished. The fact that there was no vehicle, no price and no delivery date at the time the agreements were made, was not fatal to the existence of the contracts. The court held that the dealership had breached the contracts by delivering the Porsche to a different customer and ordered the dealership to pay £35,000 in damages to Mr Hughes.

The power of contracts

The case serves as a timely reminder that contractual terms may not be binding if other assurances are given to persuade the other party to enter into the contract. Businesses should make sure that neither they nor their representatives offer assurances which contradict their standard terms.

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