No prize for second place as Formula One sponsor loses US$4m contract battle due to acquiescing in breach – Force India v Etihad, High Court…

Etihad Airways – the Abu Dhabi airline – was a sponsor of the Force India Formula One racing team when the team had been called Stryker. The team had a further investor which owned the Kingfisher beer and airline business. The team changed its name to Force India in November 2007. At the end of January 2008, Etihad objected and terminated the contract without notice because it claimed that the name change was a blatant breach of its rights under that contract.

The High Court, however, ruled that Etihad was too late to object and its behaviour following the name change suggested that it had accepted the change. Accordingly, it was deemed to have acquiesced in the change and so lost a right to terminate. Therefore, its attempt to terminate amounted to a wrongful repudiation of the contract and meant that it had acted in breach of contract, rather than the other way round. The court awarded the team US$4.6 million in damages for the breach.

Paul Gershlick, editor of www.Upload-IT.com and a Partner at Matthew Arnold & Baldwin LLP, comments: ‘This case shows the importance of not delaying when exercising rights under a contract. Otherwise, you could end up in breach rather than the other party who committed the initial transgression.’