UK: "Breach Of Any Material Term" Means Same As "Material Breach Of A Term": And Illustration Of Importance Of Including A Term Requiring Compliance With Laws

Last Updated: 29 July 2013
Article by Mark Alsop

Soccer Savings (Scotland) Ltd v Scottish Building Society [2013] ScotCS CSOH 51

Soccer Savings Limited (NB not the claimant) established a football affinity savings scheme with Dunfermline Building Society under which SSL undertook with DBS to make introductions to members of the Scottish Football Association in return for commission. At its peak, the scheme had nearly 16,000 account holders and 22 partner football clubs. DBS ran into financial difficulties and was taken over by the Nationwide Building Society, which was perceived by SSL as having less interest in the scheme.

As a result, SSL entered into discussions with the Scottish Building Society to set up an alternative scheme. SBS had concerns about being in dispute with DBS, so SSL set up a new shelf company, the claimant here SSSL, "to operate at arms' length from the existing scheme". On that basis, SSSL and SBS signed an agreement for a new scheme. The agreement between SSSL and SBS provided that either party could terminate if the other committed a breach of any material term of the agreement. There was also provision that the parties would use reasonable endeavours to comply with the Data Protection Act and that they would take appropriate technical and organisational measures against unauthorised or unlawful processing of personal data (clause 13).

It was key to success of the new scheme that a significant proportion of DBS accounts transferred to SBS. SSSL eventually signed contracts with a few clubs, but was disappointed with the lack of new accounts and account transfers. To remedy this, SSL wrote to some DBS scheme account holders enclosing promotional materials and inviting them to transfer their accounts to SBS. This resulted in DBS terminating its agreement with SSL for flagrant breach. Nationwide pointed out that DBS customers had not consented to use of their personal data for the marketing of a similar product by another financial services provider. Fearing that the account holders would be transferred elsewhere, SSSL then persuaded two clubs to write letters to their fans promoting the new scheme, claiming to SBS that it and the football clubs were joint data controllers of fan details.

Eventually SBS also terminated its agreement with SSSL. In the litigation that ensued, two of the points for consideration were when a party could terminate under the clause which permitted termination if the other party committed a breach of any material term of the agreement and whether SBS could terminate for SSSL's non-compliance with the Data Protection Act.

The Outer Court of the Scottish Court of Session (broadly equivalent to the Court of Appeal) held that:

  • "Breach of any material term" ought to be equated with material breach. If the parties were intending to "innovate" on the common law rule that a contracting party needs substantial material breach, they would have chosen much clearer words. It would give rise to considerable uncertainty if a party were entitled to terminate the agreement on the basis that the other party committed any breach, however minor, of any term that was of significance. How would the courts determine which were the terms that both parties considered significant and which were not? The Court also approved the view that a clause providing for termination on the occurrence of any breach of contract applied only to repudiatory breach.
  • SSSL's breaches of clause 13 in relation to data protection went to the heart of the contract because SSSL was obliged to offer SBS a service with a major component being the transfer of a significant number of accountholders to the new scheme and entitled SBS to terminate. Constraints of data protection legislation undermined SSSL's business plan and contributed materially to failure of the new scheme. SSL did not have consent of the data subjects to make data available to football clubs or to promote SBS. For these purposes, SSSL and SSL were treated as the same person.


The case shows that the courts are unwilling to allow a party to terminate for any breach, unless the contract very clearly says so - the courts do not wish to permit a contracting party to escape its obligations for trifling breach by the other party. The breach of data protection rules consequences shows the desirability of including in contracts an obligation to comply with all laws - if the provision had not been in the contract, then it would have been more difficult for SBS to terminate (and the same would go for claiming damages).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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