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Home » White and Carter (Councils) Ltd v McGregor [1961] UKHL 5

White and Carter (Councils) Ltd v McGregor [1961] UKHL 5

Court: House of Lords

Jurisdiction: Scottish and English Contract Law

Area of Law: Contract law – Termination, Repudiation, Mitigation of Loss, Debt vs Damages

The case of White and Carter (Councils) Ltd v McGregor is a leading authority in contract law, primarily concerning the rights of a party when the other attempts to repudiate a contract, and whether the innocent party is bound by a duty to mitigate their losses. Decided by the House of Lords in 1961, the case explores the line between claims for debt and damages, and whether a party may enforce a contract despite clear opposition from the other side. The principles laid down in White and Carter (Councils) Ltd v McGregor continue to influence modern contractual disputes, especially in matters involving refusal of performance, unwanted contracts, and claims arising from fixed obligations.

Factual Background of White and Carter (Councils) Ltd v McGregor

In White and Carter (Councils) Ltd v McGregor, the appellants, White and Carter (Councils) Ltd, were advertising contractors. In 1954, they had entered into a three-year contract with Mr McGregor’s garage business to display advertisements on litter bins. This advertising agreement was due to expire in 1957.

As the end of the original term approached, Mr Ward, a sales manager representing McGregor’s company, renewed the contract for another three years. This renewal took place without any express objection at the time of signing.

However, later the same day, McGregor’s company contacted White and Carter (Councils) Ltd and sought to cancel the agreement. In a formal letter, they stated that Mr Ward had no authority to enter into the renewal and that their proprietor, Mr McGregor, had not approved the continuation of this form of advertising.

Despite this cancellation attempt, White and Carter (Councils) Ltd refused to accept the withdrawal. They proceeded to carry out the contract by displaying the agreed advertisements. Later, they brought an action to recover the full contract price, treating it as a claim for a debt rather than damages.

The factual matrix of White and Carter (Councils) Ltd v McGregor raised important questions about contract formation, authority, repudiation, and the limits of the duty to mitigate loss.

Legal Issues

The House of Lords in White and Carter (Councils) Ltd v McGregor was presented with several intertwined legal issues:

  1. Authority to Contract: Was the contract binding when Mr Ward entered into the agreement without express authority from Mr McGregor?
  2. Repudiation: Could McGregor’s company lawfully repudiate the contract on the grounds of this lack of authority?
  3. Acceptance of Repudiation: Was White and Carter (Councils) Ltd required to accept the repudiation and avoid unnecessary performance?
  4. Claim in Debt vs Damages: Was the claim for the contract price a matter of debt (where mitigation is irrelevant) or one of damages (which would require mitigation)?
  5. Mitigation of Loss: If the claim was for damages, did the claimants fail to mitigate their loss by refusing cancellation?

White and Carter (Councils) Ltd v McGregor Judgement

The House of Lords, by a narrow majority of 3 to 2, ruled in favour of White and Carter (Councils) Ltd. The key findings were:

  • The contract was valid and enforceable.
  • Even if the garage business no longer wished to proceed, White and Carter (Councils) Ltd were under no obligation to accept the repudiation.
  • The claim was not for damages but for a debt, i.e., the agreed price for services under the contract.
  • Since it was a debt claim, the rule requiring mitigation of loss did not apply.

The Lords accepted that the situation appeared commercially wasteful, especially as the advertising was carried out despite the respondent’s clear wish not to proceed. However, legal rights arising from a contract could not be defeated simply because performance seemed unnecessary or uneconomical in hindsight.

Reasoning of the Majority

The leading judgement reinforced that a claim for a fixed sum under a contract constitutes a claim in debt, not in damages. In White and Carter (Councils) Ltd v McGregor, the majority held that once the contract was formed, the appellants were entitled to perform it and claim the full payment. They were not bound to mitigate their loss by accepting repudiation or searching for a replacement contract.

Lord Hodson, delivering one of the key opinions in the majority, firmly rejected the idea of a discretionary approach to enforcement. He warned against introducing a novel equitable doctrine whereby contracts could be disregarded simply because the court deemed it unreasonable to enforce them. According to him, contract law should not be guided by such subjectivity. The binding nature of the agreement had to prevail unless a specific legal principle allowed it to be set aside.

Therefore, in the context of White and Carter (Councils) Ltd v McGregor, the House of Lords upheld the principle that repudiation does not bring a contract to an end unless it is accepted by the innocent party.

Dissenting Opinions

The dissenting Lords in White and Carter (Councils) Ltd v McGregor argued that the appellants should not be allowed to enforce performance of a contract that had clearly become unwanted by the other party. According to them, White and Carter (Councils) Ltd had effectively failed to mitigate their loss by choosing to proceed with the advertising after knowing that Mr McGregor’s company no longer wished to continue.

Their Lordships expressed concern over the apparent waste of resources, both financial and practical, in carrying out advertisements that had no value to the client. In their view, enforcing a contract in these circumstances imposed an unfair burden on the defaulting party, which could have been avoided had the appellants acted reasonably.

However, this view did not carry the majority and thus did not alter the binding outcome of the case.

Conclusion

The case of White and Carter (Councils) Ltd v McGregor reinforces the strong commitment of English contract law to the principle that a valid contract must be honoured. It confirms that an innocent party has the legal right to insist on performance and may bring a claim for the full contract amount, even if that decision appears impractical or inefficient. The case marks an important precedent in distinguishing between types of contractual claims and continues to guide contractual disputes over termination and enforcement.