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Single Emailed Word Created Binding Contract

15th January, 2014

The Commercial Court has ruled that a single word in an email was enough to conclude a binding contract for a multi-million pound international oil trade. In response to the seller’s ‘firm offer’, the buyer had emailed succinctly back with the word ‘confirmed’.

The trade was for the sale of 25,000 metric tonnes of crude oil. The initial email string had been followed by more detailed negotiations which ultimately broke down and the buyer withdrew from the deal. In those circumstances, an issue arose as to whether a contract had been concluded.

It was submitted by the seller that its email was expressly stated to be a firm offer and that the language used had requested a definite acceptance or rejection. The time-sensitivity of the deal – a response was sought by the close of the same business day – ‘did not admit of languid negotiation’.

The buyer pointed out that at least two essential matters had not been agreed on that day and that the seller’s email had stated that ‘contract negotiations’ would follow. The buyer’s contention was that the full terms of a contract had not been discussed or mutually agreed and the single word ‘confirmed’ was insufficient to create a binding commitment.

Ruling in favour of the seller, the Court found that it was a ‘classic spot deal’ where the speed at which trades are concluded in the oil market required the parties to agree the main commercial terms and ‘leave the details’ for subsequent negotiation. Although lay business people from different jurisdictions did not always conduct their dealings in accordance with the conventions of English contract law, the language used in the emails was that of commitment and both sides had initially regarded themselves as bound by the deal.

The Court went on to dismiss various defences put forward by the buyer – including alleged misdescription of the goods and misrepresentation – and awarded the seller substantial damages. However, whilst the buyer would not have been entitled to reject the goods, it was given credit for a shortfall in the quality and quantity of the oil that would have been delivered had the deal gone ahead.

This case highlights the need to exercise care when negotiating contracts to avoid being bound when you don’t intend to be. We can advise on how to avoid this.

For further information please contact Nick Clarke on 01244 405558 or email [email protected]

 

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