When OK!’s publishers tried to avoid paying over £100,000 after signing a sponsorship deal, it was all down to a few words in the contract.
Topic: Sponsorship
Who: Northern & Shell PLC and Champion Children of the Year Awards Ltd (2001) Ltd
Where: High Court of Justice, London
When: October 2001
What happened:
OK! magazine’s publisher agreed to sponsor the Champion Children of the Year Awards 1997. The award organisers originally talked of the awards ceremony being televised on the Sunday before Christmas, following a peak time drama, and possibly attracting as many as six million viewers. Following changes of plan and benefiting charities, amended terms were agreed in writing. The deal still involved the televising of the awards ceremony. In that connection clause 6 of the agreement read “in the event that the [awards ceremony] does not proceed for any reason or that it is not broadcast by the BBC at the time and date acceptable to [OK!] in its reasonable discretion, all monies paid under this agreement by [OK!] shall be repaid on demand by [the organisers] and no further sums shall be due.”
The awards ceremony was duly held and was broadcast on Monday 22 December at 11.10pm, watched by 710,000 viewers. OK! wrote shortly afterwards demanding repayment of the £56,000 odd it had already paid and refusing to pay the £56,000 balance on various grounds, including the timing of the award event broadcast and the viewers achieved. At trial the principal issue was whether clause 6 entitled OK! to do this.
At first instance the judge held that all sums should be repayable, but the award organisers appealed and in October 2001, after the running-up of combined legal costs no doubt way in excess of the amounts in dispute, they gave judgment.
The result was that the appeal was successful and OK! ordered to pay the balance due. Despite the considerable discrepancy between the viewing figures indicated as possible and those eventually achieved and the difference in the day of broadcast from that initially stated, the Appeal judges felt that to order total repayment of all sums paid would be quite out of proportion to what had occurred. Indeed, it would suggest that there had been a total failure of consideration whereas OK! had got extensive publicity in the build-up to the awards ceremony and 710,000 had watched the broadcast. Moreover, no viewing figures were mentioned in the contract itself and the time of the broadcast was not an utterly “graveyard” slot. Accordingly, clause 6, the Appeal Court held, did not entitle OK! to walk away without paying a penny simply because they were unhappy with the viewing figures.
Why this matters:
Although the wording of the key clause 6 appears to give OK! a level of discretion, the broadcast time and date had to be acceptable in its “reasonable” discretion. When the contract was being drafted and negotiated, one can imagine the haggling that might have gone on before “reasonable discretion” (as opposed, for instance, to “absolute discretion”) was agreed. If this is what happened, it ultimately saved the day for the organisers, since it allowed the court to effectively impose its own view of what was reasonable in all the circumstances. Another aspect to be noted by those drafting contract clauses dealing with breach/non compliance is that the outcome might have been very different if the drafting had provided for a less draconian result to flow from variances in the broadcast time and date than complete repayment of all monies due.
