Out-Law News 2 min. read
19 Nov 2009, 9:18 am
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.
