Contract concluded in the course of email exchanges

In the case of Immingham Storage Co Ltd v Clear PLC (1), the court of appeal had to decide whether a contract was made in the course of email exchanges between the parties.

Through a series of email, the parties had negotiated about availability of commingled storage space for ultra low sulphur diesel at the claimant’s terminal. In due course, claimant sent a two page quotation with all essential commercial terms to the defendant via email attachment, with the word headed in bold capitals “Subject to board approval and tankage availability”.  The final sentence of the document was “A formal contract will then follow in due course”.  There was a space for defendant’s signature under the words “we hereby accept the terms of your quotation subject to your Board approval”. A copy of the General Storage Conditions was also attached.

On 5 January 2009, defendant faxed a signed copy of the quotation to claimant. On 9 January 2009, Claimant emailed defendant under the subject heading “Contract confirmation” accepting defendant’s offer and stating further that “our full contract for this business will now be raised over the next few days by our Head Office and sent for your signature and return.”

Subsequently, claimant sent the full contract to defendant. However, Defendant did not return the contract or utilize the storage facility.  It failed to pay claimant for the monthly storage charges and further denied the existence of any contract alleging that “the acceptance of the quotation in principal [sic] does not constitute a formal contract which was never signed by an officer of this company and therefore no agreement exists between us.”

The claimant’s case was that a contract had been concluded by the acceptance in its email of 9 January 2009. The defendant disputed this and contended that the return of the quotation was not an offer capable of acceptance so as to form a contract, because of reference in the quotation that “A formal contract will then follow in due course”. Further, even if such was an offer, claimant had not accepted the same, as it had stated that “our full contract for this business will now be raised …and sent for your signature and return”.

The court of appeal agreed with the judge of first instance that a contract was concluded by the claimant’s email of 9 January 2009. It was of the view that:

a)        The quotation contained all essential commercial terms and was expressly subjected only to board approval by the respondent and confirmation of tank availability. These requirements were certain and required no further discussion or negotiation between the parties. Once claimant has fulfilled these requirements and indicated its acceptance, the contract was effective. Also, the absence of a condition such as “subject to contract” was relevant.  The terms on which the quotation was signed (“We hereby accept the terms of your quotation subject to your Board approval”) made clear the limited conditionality.

b)        These factors point, overwhelmingly to an intention to create a contract if the claimant accepted the defendant’s offer.  The provision that a “formal contract will then follow in due course” does not indicate that the claimant’s acceptance of the signed quotation was subject to contract. It was “a mere expression of the desire of the parties as to the manner in which the transaction already agreed to, will in fact go through”.

c)        The reference, “full contract” did no more than carry forward the provision in the quotation that “a formal contract” would follow in due course.  It did not introduce a variation to the terms of the offer, but corresponded with them.

d)        Just as the provision for “a formal contract” did not prevent the signed quotation from being an offer to contract, so the reference to a subsequent “full contract” did not prevent the email of 9 January 2009 from being an acceptance of the offer which immediately created a contract.

e)        Further, the reference to a full contract must be read in the context of the entire email, which strongly supports the conclusion of a contract at that stage. 

       

(1)    [2011] EWCA Civ 89