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  • Peter Kam Fai Cheung SBS

Express, Imply Or Rectify

The question: "Can a licensor revoke a casual contractual perpetual licence?" has been in my mind for a while. A licensor's power to revoke is the right to terminate, but the duration of a contractual licence is expressed as perpetual, and therefore non-terminable, if interpreted literally. This is especially so if the contractual licence is "a very detailed document, which has been negotiated and drafted by expert solicitors": Marks & Spencer plc v BNP Paribas Ltd [2015] UKSC 72.

In determining its scope and meaning, a casual contractual perpetual licence can be interpreted sequentially. As "no term can be implied into a contract if it contradicts an express term", it is logical to first interpret the expressed terms in their overall context to ascertain if the licence is meant to be non-terminable in all situations eg with relief remedy provisions, or to be terminable in certain situations eg with breach termination provisions. If there is no such an express term, the next interpretative process is to consider whether a term empowering a licensor to revoke a casual perpetual licence in certain situations should be implied.

The common law principles to imply a term into a contractual licence include the requirements of "business necessity and obviousness" and if a term is not implied, "it would lack commercial or practical coherence". So it "must be necessary to imply the term and it is not sufficient that it would be reasonable to do so.": Marks & Spencer plc v BNP Paribas Ltd [2015] UKSC 72. Taking into account "the words used in the contract, the surrounding circumstances known to both parties at the time of the contract, commercial common sense, and the reasonable reader or reasonable parties", I believe it is arguable that a casual perpetual licence might not have embodied the agreement to have the effect of "business efficacy", and so "it goes without saying" that the licensor should still have the implied right to revoke a casual perpetual licence in certain situations.

In limited circumstances where the contracting parties make a common mistake, the written contract can be rectified under the equitable remedy of rectification. Thus, wrongful expressions in a document (eg a casual perpetual licence) of a prior agreement can be rectified if - "(1) the parties have a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified; (2) there was an outward expression of accord; (3) the intention continued at the time of the execution of the instrument sought to be rectified; (4) by mistake, the instrument did not reflect the common intention.": Chartbrook v Persimmon Homes Ltd [2009] 1 AC 1101. As the rectified licence might have a different meaning from that which it appears on its face, the equitable remedy may not be available if there has been delay, change of position or third party reliance!

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