Contract Law – Review of Retention: consultation

Annex B

Summary of Inveresk plc v Tullis Russell Papermakers Ltd ([2010] UKSC 19 and McNeill v Aberdeen City Council [2013] CSIH 102

Inveresk plc v Tullis Russell Papermakers Ltd ([2010] UKSC 19

“... the analysis should start from the position that all the obligations that it embraces are to be regarded as counterparts of each other unless there is a clear indication to the contrary.”

Prior to this case, the general rule which was established in Bank of East Asia v Scottish Enterprise [1997] SLT 1213, was that “the law does not regard each and every obligation by one party as being necessarily and invariably the counterpart of every obligation by the other.” Inveresk therefore creates uncertainty around whether, in any particular case, the general rule or the exception would apply.

Also, Inveresk involved a situation where more than one contract made up the transaction between the parties. When responding to the SLC’s Report, practitioners were unanimous in their support for mutuality to “remain capable of stretching across more than one contract” particularly as framework contracts are quite common.^[16]

McNeill v Aberdeen City Council [2013] CSIH 102

This is a judgement which introduced a distinction between substantive obligations - in other words the fundamental obligations that define what the contract is intended to achieve – and ancillary obligations. Thus for example in an employment contract the employee’s substantive obligation is to perform services and the employer’s to pay a salary or wages. Accordingly the employer could not withhold its obligation to the employee of mutual trust and confidence while investigating whether the employee’s conduct merited dismissal.