Keeping up your side of the bargain

There's a stand-off in our house.

Elder son has reneged on his promise to give younger son his prized Ronaldo football card.

In retaliation, younger son is holding tight to the Harry Kane card, which he'd promised in return.

It's tense. No one is happy, and I'm doing my best to ignore the wails of the "but you promised...!" variety that are ricocheting round the house.

But what exactly does a Tottenham Hotspur forward have to do with contract law ?

The power of retention

Well, it turns out my domestic life and professional life are not so different. For example, when I advise on performance in contracts what it often boils down to is what happens when one party doesn't do what they promised.

The contract equivalent of sitting on Harry Kane is called retention. In essence, if one party doesn't perform his side of the bargain, the other side can withhold performing his side.

Taking a simple example, if a builder builds you a wendy house when you agreed he would build you a tree house, you're allowed not to pay him. He hasn't done what was agreed, so you don't need to.

The power of retention is a kind of security: by withholding your side of the bargain, you incentivise the defaulting party to do the job they were supposed to. If they do that, you get what you ordered and they get paid. Everyone wins.

The finer details

There are qualifications of course. Law is never without some small print.

Would you still be entitled not to pay if the same builder had delivered your treehouse, but the door was red instead of green, for example?

This was a similar issue raised in a recent case we handled for house building clients. The purchasers had agreed to buy a new house from the builder. The property had been signed off by the local authority, and this meant the purchasers were due to pay the purchase price - just over £540,000.

That’s not happening, said the purchasers. We don’t like the look of the roof tiles. They’re black, not grey. They look stained when they’re dry. We don’t know if something is wrong with them, but if they need replaced it’ll cost £12,000.

We still think you should pay, said the house builder. We’ve fulfilled our side of the bargain, as the council and NHBC have signed off the property. We think the tiles are fine, but even if your complaint is valid, it’s not sufficiently material to justify withholding payment.

The court agreed with our house building clients, who had by that time pulled out of the deal and sold at a loss to a third party.

The moral of the story is that the right to retain is a powerful and useful remedy, but care needs to be taken that it is appropriately used. Exercised when it shouldn’t be might expose you to claims for losses of the other party .

Anyway, back to those cards. I confess. I cracked first. Mother’s overriding right of retention has been exercised. All football cards have been consigned to the top shelf in the kitchen until brotherly love is restored.