The Supreme Court allowed an appeal by AHP Manufacturing BV, trading as Wyeth Medica Ireland, and ruled that it was not required to give Dakota Packaging Ltd reasonable notice before ending their trading relationship.
The judgment, delivered by Fennelly J on 15 December 2004, overturned a High Court decision that Wyeth had to give 12 months’ notice and continue buying the packaging it required during that period. The Supreme Court held that there was no relevant agreement into which a notice term could be implied. Its order addressed only the notice issue before it.
Wyeth argued that the High Court had found there was no long-term supply agreement, so it could not imply a contractual term requiring notice. Dakota accepted that a term could not be implied without a contract, but argued that the trial judge had effectively found an agreement despite using language it said was ambiguous.
Fennelly J concluded that the trial judge had been deliberate: the parties had individual contracts for specific orders, but no separate long-term or medium-term supply agreement. Wyeth’s orders and purchasing documents also indicated that forecasts did not commit it to buy projected quantities outside a defined firm period.
Dakota had relied on the scale and history of the business, its investment in facilities, close cooperation between the companies and a 1996 Wyeth letter referring to transferring business over a mutually agreed period. The Supreme Court said the trial judge had rejected the claim that the letter created a binding commitment. It also noted that Dakota’s sales director accepted there was no long-term supply agreement and described the claimed understanding as a firm belief based on the working relationship.
Dakota had invested about €10 million in its facilities as its business with Wyeth grew. Wyeth’s purchases from Dakota reached €8.6 million in 2000, and represented about 40% of Dakota’s turnover when proceedings began. The judgment said the quality of Dakota’s service was not disputed, but held that the commercial relationship and investment did not establish a contract capable of carrying an implied notice term.
The court also said that courts do not have a broad discretion to imply terms simply because they are fair or reasonable. A term must be necessary and capable of precise formulation. The court did not decide Wyeth’s arguments about the Statute of Frauds or the Sale of Goods Act, because its conclusion that there was no relevant contract made those questions unnecessary.
The Supreme Court substituted an order that Wyeth was not required to give reasonable notice of termination. It noted that Dakota intended to pursue outstanding matters, including an alleged misrepresentation claim, in the High Court; it made no order on those matters.