Rose and Frank Co v JR Crompton and Bros Ltd [1924] UKHL 2
Citation:Rose and Frank Co v JR Crompton and Bros Ltd [1924] UKHL 2
Rule of thumb:Are honour clauses legally enforceable? As a general rule, no - honour clauses do not create legal obligations as there is no intent to create legal obligations with these, however, if they have been followed for a long time in practice, they can become contract terms.
Background facts:
The basic facts of this case were that there was an agreement made in the UK that Rose and Frank would be the sole supplier of JR Compton’s carbonised tissue paper in the US. This exclusive agreement was put into place with an ‘Honour Clause’. However, Rose and Frank were then removed as the sole supplier of carbonised tissue paper and sought to enforce the ‘Honour clause’ to claim damages.
Parties argued:
Rose and Frank argued that the 'Honour Clause' had all the basics of a contract, that it was followed in the agreement and it created a legally binding contract. JR Compston argued that the use of the words 'Honour Clause' at the top clearly demonstrated that no legal obligations were to come from the terms there, with it being purely a moral rather than legal obligation on them regarding, and they argued that this invoked the principle of there being no 'intent to create legal relations' ensuring that the essential error principles prevented any contract being formed over them.
Judgment:
The Court held that Rose and Frank were not entitled to damages. The Court held that an honour clause in a contract can cause a contract to be non-binding and only suggestive of best case practice.
Ratio-decidendi:
'There seems to be no difference in principle between a void contract and an agreement which is not a contract; the essence of the matter is that in neither case do the purported stipulations result in legal obligations. The question raised appears to me difficult. I think it quite conceivable that a man whose express object was that "assured arrangements should be made for the supply of paper for some considerable period ahead" might assent to an honourable understanding extending the period of agency, but might be unwilling to relinquish the only substantial rights he had in his existing agreements; and I think the repeated reference in the record of the honourable understanding to the continued existence of present arrangements would encourage this view. On the other hand, I also think it conceivable, though I personally should think it improbable, that a man having the avowed object referred to would abandon his legal rights for the benefits he hoped to get under the new arrangement... I should vary the order of Bailhache J. by declaring that the agreement of July, 1913, is not a legally binding agreement...’, Atkin LJ
'the question raised appears to me to be difficult ... the essence of the matter is that in neither case do the purported stipulations result in legal obligations', Atkin LJ
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.