Breach of Contract

Commercial Agreements - Breach of contract

In the case of University of Wales v London College of Business Ltd [2015], a decision of the Queen's Bench Division, Cardiff District Registry (Mercantile Court) held that the claimant was entitled to judgment in respect of the claim for payment due under validation agreement from defendant business school and the defendant was entitled to judgment on the counterclaim in respect of suspension by the claimant of validation.

The claimant university was responsible for validating undergraduate and postgraduate degrees of that university in the UK and overseas. The defendant, LCB, was a limited company, which carried on the business of a college with a view to profit. Between 2008 and 2012, the qualifications that LBC offered were validated by the claimant pursuant to a series of agreements (the validation agreement), the latest of which was dated 1 February 2012.

Students enrolled on one of the defendant's validated courses received, upon the successful completion of the courses, undergraduate or postgraduate degrees or other qualifications from the university. The validation agreements stipulated that LCB would pay specified annual fees to the university in relation to the validation services provided by the university. In 2012, it was alleged that students at LCB were being sold dissertations. Also that LCB was assisting overseas students to obtain visas by selling them the necessary qualifications in contravention of the immigration law. LCB intakes were suspended with immediate effect.

The university brought a claim for £42,900 for payment due under the validation agreement, in respect of four invoices rendered in 2012. The university claimed to terminate the validation agreement on account of LCB's failure to pay the invoices. LCB denied that the invoices were not properly rendered under the validation agreement and argued that the university's alleged termination of the validation agreement was in breach of contract. Furthermore, the university had acted in breach of its obligations under the validation agreement by suspending enrolments twice at LCB during 2012, destroying LCB’s business and purported to have accepted the university's repudiation of the validation agreement. LCB counterclaimed for damages arising from the university's alleged breaches of contract; it valued its claim at around £25m.

It was ordered that the trial should be confined to the issues of:

liability and quantum on the claim: and
liability on the counterclaim, including breach of contract or other duty but excluding causation and quantification of damage.

The issues that arose for consideration were, amongst others:

whether the university had a contractual power to suspend enrolment; if not
whether LCB was precluded from taking the point on account of waiver, estoppel or some other factor relating to its own conduct; and
whether the university was entitled to terminate the validation agreement.

The court ruled:

Applying established principles, the university had had no power under the validation agreement to suspend enrolment of students pending the completion of a review.
Furthermore, there was no need to imply into the validation agreement a unilateral power of suspension on the part of the university in order to give it proper commercial sense.
The validation agreement worked perfectly well without such a power.
With regard to estoppel and waiver, neither had any application to the case.
With regard to the right to terminate, the university was entitled to terminate the validation agreement when it had purported to do.
LCB's purported termination of the validation agreement was invalid and ineffective as it had already been terminated.
In relation to the counterclaim, the court held that as in breach of contract in suspending registration of new students on two occasions in 2012, LCB was entitled to judgment on the counterclaim for damages.

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© RT COOPERS, 2015. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.