In a hurry to contract?

In a recent Commercial Court decision a contract was found to be subject to BIMCO terms. The result of this meant that a claim for USD37,124,886.00 in legal process was lost.

It is unnecessary for the purposes of this article to recite the facts, suffice it to say that it was for A to prove the incorporation of the BIMCO terms into its contract with B to succeed against B’s insurer C. C claimed the contract had been concluded in two emails containing offer and acceptance and the offer was not subject to BIMCO terms. A contended that the contractual negotiations involved a far wider picture including telephone calls, other emails and evidence which went to the issue of whether or not these terms applied.

HHJ Steel set out the legal principles to be applied which act as a timely reminder for those entering into contracts in terms of how to ensure the formation of a clear and binding contract and the ability to prove the same.

He found that offer and acceptance s contained all the essential terms for the contract to be binding; the negotiations were not subject to contract; and it was likely that sometime before the emails A’s agent did mention that the contract would be on standard terms. This was because A had initially offered to perform on LOF terms which B rejected and it seemed likely that both parties intended that standard terms of some type would apply.

B’s agent recalled that B had wanted “commercial terms”. Three employees of A’s agent recalled, or corroborated, that standard terms were mentioned. HHJ Steel accepted this and other evidence that invariably professional salvage services would be on the basis of standard terms and absent LOF terms, a BIMCO contract was the only alternative option. He pointed out that although the agreement was not subject to contract it would be reduced to writing; that A was to prepare that draft; when A asked B’s agent to draft it, the agent was not surprised by the request for a BIMCO contract; in a recap email, a witness had described the finalised version as a BIMCO contract; and that the absence of any request for an explanation of this description strongly suggested that B regarded BIMCO terms as appropriate.

What do we learn from this decision? The legal costs were £1.5million. This was an extremely high risk case bearing in mind the gaps in the documentary evidence and the lack of attendance notes and faded memories of those giving evidence. C was successful and not surprisingly in view of the Commercial Court’s well known stance that commercial firms deal on commercial terms. It is unwilling without very strong evidence to accept that no such terms apply. That is abundantly clear from the case law relied on and the manner in which the court dealt with the evidence. If B did not agree to BIMCO terms this was a very unfortunate decision for C.

If you wish to rely on a contract or any particular terms therein before a court you must be able to evidence that contract otherwise the court is left to make assumptions on the balance of probabilities based on the entire picture of evidence available. If you wish to proceed with a claim and your contract is not clear you have to spend considerable time and effort searching for collateral evidence that may or may not support your case.

However urgent the contract is at the time it is made, make sure that oral agreements are recorded and confirmed in writing and any standard terms are clearly mentioned. If you are contracting through agents ensure you receive and read all communications so you can decide whether they need to be responded to or not. If anything is said that is not agreed with, question it. Require your agent to keep full attendance notes of conversations and report them to you in detail. Keep the evidence together.

Whilst a contract cannot prevent claims it can clarify the rights and obligations to the extent that expensive and damaging legal proceedings are streamlined or unnecessary.

020 7702 4442

Website: www.pysdens.com