In the weeks following the start of the Covid-19 lockdown, Advanced Multi-Technology for Medical Industry (t/a Hitex), a Jordanian manufacturer of medical supplies, concluded a supply contract with Uniserve Limited for the manufacture and delivery of 80 million surgical masks. The supply contract, dated 21 April 2020 and signed by both parties shortly thereafter, required a strict schedule of deliveries ex-works from Hitex’s factory in Jordan.
At the same time, Uniserve entered into a commission agreement with Caramel Sales Ltd, whose sole director and shareholder, David Popeck, had introduced Hitex to Uniserve. Under this commission agreement, Caramel was to receive commission on shipments made under the supply contract. However, Caramel was not acting as agent for Uniserve. Caramel’s role was limited to that of an independent introducer or intermediary, remunerated by commission for bringing the parties together, and not as a representative authorised to contract or vary terms on Uniserve’s behalf. Caramel’s entitlement was therefore contingent on the continued performance of the supply contract, and when the supply contract was lawfully terminated, its right to commission fell away.
Also involved was another intermediary, Maxitrac Ltd, a company controlled by Dr Stead. During the litigation Hitex and Caramel contended that Maxitrac, through Dr Stead, acted as Uniserve’s agent in both arranging and managing the supply contract.
The first shipment of 6 million masks was due on 28 April 2020, followed by weekly instalments of 5 to 7 million masks through July. Almost immediately, difficulties arose: Hitex encountered production problems, particularly the absence of the required nose-bridge in the masks, which led to machine modifications and reduced production capacity. Delivery dates were missed.
On 22 May 2020, Dr Stead, on Uniserve’s behalf, proposed a revised delivery schedule, which Hitex confirmed by email on 26 May. Yet in June 2020 Uniserve ceased collections and, around 17 June, treated the supply contract as at an end. In response Hitex claimed that Uniserve had no right to terminate and claimed damages for wrongful termination and non-payment. Caramel and Mr Popeck claimed commission on the unfulfilled shipments. Uniserve argued that Hitex was in breach of the original schedule, that the revised schedule had not been validly agreed, and that it had lawfully terminated the contract.
In the High Court judgment* was given in favour of Hitex. It was decided that Uniserve was not entitled to terminate and Hitex was awarded damages exceeding US $16 million. The judge accepted that the revised schedule had been agreed and that Uniserve had acted through its agent, Dr Stead of Maxitrac, in doing so.
The appeal
Uniserve appealed to the Court of Appeal. The appeal concerned four principal issues:
- whether Uniserve had relied on alleged misrepresentations about Hitex’s production capacity;
- whether Uniserve had affirmed the contract or was entitled to terminate it;
- whether Hitex was capable of meeting its cumulative delivery obligations given its commitment to reserve part of its production for the Jordanian Government; and
- whether the trial judge had decided matters not been argued by the barristers before the court;
The Court of Appeal allowed Uniserve’s appeal. It decided that the judge had been wrong in finding that the revised delivery schedule was binding and so Uniserve had been entitled to terminate. The judgment restored the commercial balance in Uniserve’s favour and dismissed the associated claims for commission by Caramel Sales Ltd and Mr Popeck.
The Court of Appeal emphasised four points:
- Reliance: Uniserve had carried out its own due diligence before contracting and did not rely on the pre-contract email that had referred to Hitex’s manufacturing capacity.
- Affirmation: Hitex’s conduct following Uniserve’s notification of termination did not amount to acceptance of repudiation. As such the supply contract had not been kept alive in a way that prevented Uniserve from terminating it.
- “Net availability”: the Court of Appeal clarified the concept of “net availability” under ex-works instalment sales — that Hitex’s reservation of 15 per cent. of its output for the Jordanian Government meant it could not meet full cumulative obligations, giving Uniserve a legitimate basis to treat the supply contract as repudiated.
- Procedural fairness: overhanging the Court of Appeal’s judgment was the strong reminder that a court should not determine a case on grounds that have not been pleaded or argued. The judge in the High Court had relied on matters outside the points which the parties had argued before the High Court.
Agency and authority
Although the appeal was determined primarily on contractual performance and termination, it also highlights complex questions of agency and authority that had been argued throughout the litigation.
In the chain of relationships, Mr Popeck and Caramel acted as intermediaries introducing Hitex to Uniserve. Mr Waller, another intermediary, relayed early correspondence about production capacity. Meanwhile Dr Stead, through Maxitrac, acted on behalf of Uniserve in the negotiation and administration of the supply contract.
In the High Court the judge had treated Dr Stead as having both actual and apparent authority to negotiate variations to the delivery schedule. The Court of Appeal did not disturb those findings of fact but observed that, even accepting that Dr Stead had acted as agent, the variation did not create binding contractual obligations because the necessary formalities for variation under the contract had not been satisfied and because Hitex’s subsequent performance fell short of its own commitments.
The factual matrix therefore illustrates how different forms of authority operate in commercial practice:
- Actual authority arises when a principal gives an agent express permission to act — as when Uniserve authorised Dr Stead to negotiate with Hitex.
- Apparent authority arises where the principal, by words or conduct, leads a third party reasonably to believe the agent has authority. Uniserve’s consistent use of Maxitrac and Dr Stead in communications with Hitex created such an appearance, which is why Hitex could plausibly argue that the revised schedule had been authorised. Yet apparent authority cannot validate a variation that fails the contractual requirement for written confirmation or that is inconsistent with the underlying bargain between supplier and customer.
- Authority by estoppel (the situation which arises when a business or individual, by words or conduct, allows others to believe that someone has power to act on their behalf and if others reasonably do so rely on that impression, the law will hold the business or individual to it) may bind a principal that allows another to act on its behalf without objection, but the doctrine depends on fairness. Here, the Court of Appeal’s reasoning shows that authority by estoppel cannot override the express provisions in a contract which set out how the contract can be varied. Equally, the Court of Appeal’s judgment reminds agents that even when acting under apparent authority, they risk personal exposure if the principal later denies actual authority — for instance, through claims for breach of the implied warranty of authority.
For principals
For principals, the decision of the Court of Appeal highlights that:
- principals must define the scope of their agents’ authority precisely and communicate it clearly, both internally and externally. If agents are permitted to negotiate, the extent of that power — whether to agree terms or only to relay proposals — should be set out in writing.
- Principals must control communications: silence in the face of an agent’s unauthorised statements can amount to acquiescence and may create apparent authority.
- In contracts requiring written variations by an “authorised representative,” care must be taken to specify who that representative is and what formalities apply. The ambiguity in Uniserve’s supply contract — the use of the lowercase term “authorised representative” rather than a defined term — was exploited in the High Court to argue that a non-director could vary the schedule.
- Principals should monitor intermediaries and correct any misunderstanding promptly. The involvement of multiple layers — Caramel, Mr Waller, Maxitrac — created the impression that several people spoke for Uniserve. Had Uniserve made clear that only its directors could amend schedules, the dispute on variation might never have arisen.
For agents
For agents the case provides its own warnings.
An agent who assumes authority beyond the limits set by the principal may be personally liable to third parties for acting without authority. Even where the agent believes authority exists, the absence of clear written confirmation leaves room for dispute. Agents should therefore ensure that their instructions are documented and that any commitments or representations made to third parties are either pre-cleared by the principal or expressly stated to be “subject to confirmation.” The history of this case shows how easily a well-intentioned intermediary — seeking to preserve a commercial relationship — can overstep boundaries, with lasting financial consequences.
Authority and termination rights
The case also reminds commercial parties of the close link between authority and termination rights. Had the revised schedule been validly authorised, Uniserve’s subsequent termination might have been wrongful, exposing it to substantial damages. Conversely, because the schedule was found not to have been binding, Hitex’s shortfall in performance justified Uniserve’s termination. As such the authority question was not peripheral but central to determining liability.
In commercial reality, the pressure of urgent procurement during the pandemic and the use of multiple intermediaries made formality seem expendable. Yet this judgment reasserts that in English law, clarity of authority and adherence to formal variation requirements remain indispensable. The Court of Appeal’s decision is a reminder that the law of agency is not a mere technicality: it is the foundation that determines who bears contractual risk when communications pass through many hands.
*For our review of the High Court’s decision considering the issue of anticipatory breach https://www.foxwilliams.com/2024/08/29/navigating-anticipatory-breach/
