When a Receiver is appointed to a company by the debenture holders he will generally write a letter and sometimes telephone to all those with whom the company has outstanding contracts informing them of his appointment. He will often inform the contractor that the company will not honour its contract and go on to invite him to enter into a new contract with the Receiver, offering as inducements on the one hand a promise that the Receiver will pay in full for all goods delivered and services rendered thereafter under a new contract with him, and on the other hand a warning that the contractor will only be an unsecured creditor for the price of those goods and services if he supplies them under the original contract. Businessmen should not readily submit to these inducements to abandon their contracts until they have satisfied themselves that they are not also abandoning all the debts the company owes to them under past contracts.

In George Barker (Transport), Ltd. v. Eynon [1974] 1 Lloyd’s Rep. 65 the Court of Appeal has pointed out that there are cases where a contractor can, by refusing to make a new contract with the Receiver, see himself paid not only for the work he does under the original contract after the appointment of the Receiver but also for all his outstanding account. In that case carriers who contracted under the Standard Conditions of the Road Haulage Association were owed over £3,000 by a company for work done during several months. They then contracted to carry a further load (worth over £4,000) for a charge of £58. After they had made the contract, but before they had taken delivery of the load at the docks, a Receiver was appointed to the company.

The Receiver telephoned to the carriers in the usual manner, promising to pay the £58 himself if the carriers performed the carriage under a new contract with him and telling them (wrongly, although honestly) that they could not recover the £3,000 except as one of the general body of unsecured creditors. The carriers said they intended to make no new contract, and to exercise the lien provided under the original contract by the Road Haulage Association’s Standard Condition 13, which reads as follows: