Medpro: High Court prescribes legal lessons in contractual interpretation

The PPE Medpro case has been widely reported. But the coverage has not focused, as we do, on the contractual interpretation, estoppel, and mitigation angles.

Complex documentation

The Department of Health contracted with Medpro to provide sterilised gowns for the NHS during the COVID-19 pandemic. The relevant parts of the contract were contained in an order form, a schedule of key provisions, schedules of general conditions, definitions and additional special conditions, and a technical specification contained in nine annexes. It also contained provisions setting out the hierarchy between these elements. The Department of Health brought a claim against Medpro for breach of contract, claiming the gowns were unusable.

A chunk of Medpro's argument on interpretation was that, despite multiple references to various standards, none of them were part of the agreed terms. Crucially, Medpro accepted that there was an obligation to provide to a specified sterility assurance level, but denied that there was any independent contractual obligation to demonstrate a validated process.

The court found that:

1. An obligation to follow a validated process demonstrating relevant sterility levels, although not an independent obligation in the contract, was inherent in a separate obligation to deliver gowns to a specified level of sterility. 
2. An obligation to include a sterilisation marking on the gowns existed due to the “sheer weight” of contractual provisions requiring compliance with applicable laws, which outweighed any indications that this was not a requirement. 

No estoppels

Medpro argued that the claim should fail because of contractual estoppel, or estoppel by representation, convention or acquiescence. This was rejected because: 

1. Medpro was wrong on contractual interpretation, so contractual estoppel did not apply.
2. No other form of estoppel applied as the Department of Health gave no relevant unambiguous representation in the process of agreeing the contract. The court considered the full context, including Medpro's knowledge of both sterilisation and the contractual process and the complex events leading up to the agreement, in contrast to the brevity of the statement on which Medpro sought to rely. 
3. Medpro could not prove reliance on any representation as it did not call any witnesses and, given the commercial nature of the parties, could not rely on the presumption of inducement.
4. The contract contained clauses which would have precluded an estoppel claim regardless. 

No failure to mitigate

Medpro argued that the Department of Health failed to mitigate its losses. The court rejected this on the grounds that there was no realistically identifiable route to sell or deploy the gowns elsewhere; the Department was entitled to recover the full cost of the gowns. 

No claim for storage costs 

The Department of Health also claimed costs for having to store and dispose of the gowns. The court noted storage costs could have been recovered, but dismissed the claim because the Department, in calling a senior member of the relevant team, failed to provide adequate factual evidence to underpin the documentary evidence it provided on this point. 

Judgment: Secretary of State for Health v PPE Medpro