Raymond Bieber v Teathers Ltd
High Court
Citations: [2014] EWHC 4205 (Ch).
Facts
The parties were trying to settle a legal dispute involving failed investments in film and TV partnerships. After mediation failed to produce results, the parties and their solicitors continued negotiating by email. They exchanged several offers and draft agreements between each other. However, each was rejected. One of these draft offers was explicitly ‘subject to contract’, but the rest were not.
One point of contention was whether the claimant should be required to indemnify the defendant against third-party claims. However, the defendant only brought this up once, early on during the negotiations.
After three years of negotiations, the defendant sent an email stating that they were prepared to settle for £2 million. They did not mention the indemnity issue. They subjectively thought that the offer would not be binding until the parties signed a full and formal contract of all the settlement terms. The claimants accepted this offer and their solicitors offered to draw up a consent order. The defendant responded ‘Noted, with thanks’.
When the claimants sent the consent order, the defendant responded with a more detailed settlement agreement containing an indemnity clause which the claimants considered unacceptable. The claimants refused to sign this agreement. They argued that the defendant had made them a settlement offer which they accepted, meaning that there was a binding contract. They sought a declaration from the court to this effect.
Issue(s)
- Had the parties reached a binding contractual agreement?
Decision
The High Court held in favour of the claimants. The wording of the defendant’s email indicated that it was an offer and contained all essential terms, and the claimant accepted it. The defendant’s response reinforced this conclusion: it demonstrated that both parties thought they had a finished agreement. The defendant never made objectively clear that they had reservations or considered the offer to be subject to contract. There was therefore a binding agreement, not subject to contract.
This Case is Authority For…
Whether the parties have reached a concluded agreement is assessed objectively, taking into account the whole course of negotiations. The parties subjective beliefs are not relevant. If there is an objective meeting of minds, a contract forms immediately even if the parties intend to later execute a formal document recording the terms. It also does not matter that certain significant (but non-essential) terms have yet to be agreed.
However, where the parties intend to enter into a formal agreement, ‘whether the parties intended to be bound immediately or only when a formal agreement has been executed depends on an objective appraisal of their words and conduct’. There is no need for the parties to expressly say that the negotiations are ‘subject to contract’, so long as this is objectively apparent.
If negotiations are subject to contract, the parties may still expressly or implicitly agree to waive the need for a formal contract.
Other
Events subsequent to the agreement are not normally relevant or admissible when determining whether there is a binding contract.
