Commercial Law – Contract Cancellation – Deposit Refund – Advertising Marketing
The case of Ogilvy & Mather Ltd v Silverado Blue Ltd [2007], concerned issues related to the plaintiff’s right to terminate a contract subject to losses suffered by the defendant. The plaintiff was an international advertising, marketing and public relations agency. He hired the defendant, a visual effects producer, to produce a commercial for Unilever.
Under clause 14 of the engagement contract, the agency had the right to cancel all or part of the production. In the event of such cancellation, the defendant was entitled to recover the sums corresponding to the work performed, until receipt of the cancellation notice.
It was agreed, as part of the terms of the contract, that the commercial would be produced within a specific time frame. The contract price was payable in two installments, one before the start date and the rest after the end of the commercial. The claimant paid the first installment shortly after signing the contract. However, less than two weeks later it became known that the market investigation carried out on the production was unfavourable. Therefore, the plaintiff canceled the agreement with the defendant.
The plaintiff initiated proceedings against the defendant in respect of the first installment. The plaintiff argued that he had asserted his rights under clause 14 to cancel the contract. In response, the defendant argued that the contract had not been canceled but had simply been delayed or postponed.
Problems arose as to when the deal had been cancelled. If the agreement had not been terminated, it had to be established whether the defendant was entitled to set off any sum against the first installment payable to the plaintiff.
The court held that in this case, the agreement had indeed been canceled in accordance with clause 14 of the contract. However, the plaintiff was entitled to a return of the deposit, subject to any claim the defendant had under the cancellation clause.
The defendant had failed to meet the burden of proof in establishing the losses that had extinguished or diminished the claimant’s right to recovery of the deposit. They had been unable to show that they had incurred specific losses before the contract was cancelled. Consequently, the sentence would be favorable to the plaintiff, so the defendant was ordered to return the bond.
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© RT COOPERS, 2007. This Information Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. Its sole purpose is to highlight general issues. Specialized legal advice should always be sought in relation to particular circumstances.