Implied novation not prevented by termination provision
14 June 2022
In Gama Aviation the High Court found that a clause which prevented unilateral termination of an agreement except by written notice was not also a bar to termination of the agreement by way of informal novation.
International Jet Club entered into an agreement to provide services for the defendant's aircraft. As a result of a re-organisation, the Club and GAMA argued that the agreement had been transferred, by implied novation, to GAMA and that, from the relevant date, GAMA provided the aircraft services.
When the defendant stopped paying, GAMA sued and obtained judgment in default. The defendant applied to set aside this judgment arguing that the express terms of the agreement precluded implied novation.
A provision in the agreement stated: “This agreement shall commence from the date of this agreement and shall ... continue until such time as either party gives the other not less than three months’ notice in writing of termination of this agreement.” The question was whether this precluded implied novation.
Despite some initial doubts, the court ultimately concluded that, consistent with commercial common sense, the provision only identified the agreement’s start date and a mechanism for unilateral termination. The clause had no bearing upon whether mutual termination was available. As the contract was silent as to a provision for termination by agreement, the court concluded that there was no bar within the contract for termination by implied novation.
Additionally (and in the alternative), the court applied the estoppel reasoning in Rock Advertising to conclude that the defendant was estopped from relying on the provision and that the novation was therefore effective.
Judgment: Gama Aviation (UK) Limited, International Jet Club Limited v Mwwmmwm Limited (Westlaw)