The Court of Appeal in Ehrentreu v IG Index held that very clear express words are required to give rise to a contractual duty to protect parties against inflicting economic harm on themselves.
Ehrentreu placed substantial spread bets on market movements through IG. Under the agreement between the parties, Ehrentreu acknowledged that if he failed to pay a margin call within five business days of it falling due then IG was obliged to close out his bets.
In the summer of 2008, Ehrentreu placed bets on the movement of the RBS share price. The bets went disastrously wrong and in September 2008 IG began making margin calls on Ehrentreu. Ehrentreu pleaded with IG to keep his bets open. When IG eventually closed the bets in October 2008, Ehrentreu’s account was over £1.2 million in debt. IG commenced a debt claim against Ehrentreu. In his counterclaim – the subject of this appeal – Ehrentreu claimed that IG was in breach of the agreement in not closing out his bets sooner and that this caused him to suffer substantial loss.
The Court of Appeal referred to the duty of care in tort where the duty to protect a party from deliberately inflicting harm on himself is “truly exceptional” (Calvert v William Hill). It held that in contract, very clear express words spelling out such a duty would be required before the court could conclude that such an exceptional duty arose. The provision of the agreement requiring IG to close out bets, without such express words, was simply not intended to protect spread betting addicts against themselves. As such, IG’s breach of this provision was not the cause of Ehrentreu’s loss. The cause was, rather, his decision to remain in the market.