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The Supreme Court decision in Makdessi v Cavendish Square Holdings…

- - - - courts recognise that the penal rule impedes on FOC and therefore should not be extended. but also refused to abolish it even though recognised that it would be unlikely to be created today. therefore consistency is maintained.
    - - broader contractual sanctions can be deemed as penal now, not just monetary ones.
      - courts will take into consideration the individual facts of the case in determining legitimate interests. particularly emphasised the wider commercial considerations. e.g. in this case, good faith of particular importance. also the fact that client relationships were important. and the fact that the founders were likely to have particularly significant relationships and could therefore do the most harm to the business
      - the fact that the parties were of equal bargaining strength, negotiated the contracts for 6 months and both with good legal representation was of importance. therefore indicates that the courts will be more likely to determine a clause as penal, and offer protection to parties, where this is not the case
        
        so although broader contractual sanctions can be considered, protection is still offered to the parties. penalty rule, and restricting FOC, is not without limitations
  - - - my view: reasonable to consider clauses secondary where arise as a result of a breach. although reasoning for 5.1 being primary is strong, contend that given it only occurs where 11.2 breached, should be considered secondary. 5.1 doesnt always come into play, arises as a new oblgiation. should only be primary obligations where always bound to do something.
      - split on 5.1. substance not form [15] [43] [158]
- - - - Philippa = dangers in treating relational contracts as those with implied duty
      - JW Carter = agree with this opinion but says shouldnt be followed
      - Has it been followed in subsequent case law?
  - - - Nick Isaac agrees. no general duty but can be implied or expressly agreed
      - Philippa: yes this is the ruling from Yam Seng, but should be more traditionally orthodox approach; express terms viewed
    - - Construction of express terms in contract + fitting into context = general test?