Manx Electricity Authority v J P Morgan Chase Bank

Manx Electricity Authority v J P Morgan Chase Bank

The Court of Appeal held that the judge’s reasoning—that only an actionable breach at the time of the second demand could support a call on the guarantee—was unsustainable. The question of whether the STA discharged or waived the underlying breach, and whether the guarantee required an actionable breach or merely an accrued breach, were matters so closely tied to the merits that they must go to trial. The appeal was allowed, and the strike-out of the claim based on the second demand was set aside.

Parties
Claimant/appellant: Manx Electricity Authority; Defendant/respondent: J P Morgan Chase Bank
Jurisdiction
England and Wales
Judgment Date
03 October 2003
Procedural Posture
Civil Appeal / Appeal From Commercial Court (queen’s Bench Division) on a Summary Judgment/strike Out Application
Outcome
appeal allowed
Legal Topics
Performance Guarantees, Anticipatory Breach, Settlement Agreements, Summary Judgment, Autonomy of Guarantees
Contract Law Banking Law Performance Guarantees Anticipatory Breach Settlement Agreements Summary Judgment Autonomy of Guarantees

Case Brief

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Parties

Manx Electricity Authority

Claimant/appellant

J P Morgan Chase Bank

Defendant/respondent

Procedural Posture

Civil Appeal / Appeal From Commercial Court (queen’s Bench Division) on a Summary Judgment/strike Out Application

Legal Issues

  1. 1 Whether a demand under a performance guarantee can be made after a settlement agreement where the underlying breach is no longer actionable against the contractor
  2. 2 Whether the guarantee requires an actionable breach at the time of demand or merely an accrued breach
  3. 3 Whether the Settlement and Transfer Agreement (STA) discharged or waived the underlying breach

Ratio Decidendi

The Court of Appeal held that the judge’s reasoning—that only an actionable breach at the time of the second demand could support a call on the guarantee—was unsustainable. The question of whether the STA discharged or waived the underlying breach, and whether the guarantee required an actionable breach or merely an accrued breach, were matters so closely tied to the merits that they must go to trial. The appeal was allowed, and the strike-out of the claim based on the second demand was set aside.

Court Disposition

appeal allowed

Orders

  • Strike-out of the claim based on the second demand set aside
  • Matter remitted for trial on the remaining issues