Summary
A U.S. television company (“Reveille”) brought a claim against a UK-based cookware distributor (“Anotech”) for breach of contract. The claim was based on an alleged agreement that Reveille would integrate and promote Anotech’s products in episodes of the MasterChef U.S. television series and license to Anotech certain rights to use the MasterChef brand.
The parties started to negotiate a short form agreement known as the “Deal Memo“. The Deal Memo stated that it would not be binding on until executed by both Parties. Anotech amended, signed and returned the Deal Memo to Reveille, however same remained unsigned by Reveille. Negotiations for the drafting of long form agreements, which were intended to replace the Deal Memo, later broke down and were never completed.
Reveille contended that it entered into a binding agreement with Anotech on the terms set out in the Deal Memo. Anotech’s position was that it was not bound by the Deal Memo as the terms of same stated that the Deal Memo was not binding until signed by both parties. Anotech also stated that the Deal Memo had not been accepted by conduct as any steps taken by the parties were merely in anticipation of an agreement being reached and further, if the Deal Memo was found to be binding, it was subject to a certain condition precedent which had not been fulfilled.
Held
The Court of first instance held that there was a binding contract between the parties as the Deal Memorandum had been accepted by Reveille through its conduct.
Anotech appealed however the Court of Appeal dismissed the appeal and in its decision, stated that the provision in the Deal Memo which stipulated that the agreement would not be binding on the claimant unless signed was for Reveille’s benefit. In not signing, Reveille was waiving a prescribed mode of acceptance which should be treated as effective, so long as there was no prejudice to Anotech.
The Court of Appeal summarised the contract laws as follows:
- consent to a contract is found in the acceptance of an offer, and acceptance can be by conduct provided that conduct is objectively intended to constitute acceptance;
- an offer in the form of a draft agreement can be accepted when it was never signed;
- if a party has a right to sign a contract before being bound it can, by using clear and unequivocal words or conduct, waive the requirement and conclude the contract without signature;
- a party can waive a prescribed mode of acceptance if it acquiesces in a different way provided that acceptance has not prejudiced the other party;
- where parties have not complied with a signature requirement a draft agreement can still be binding if essentially all the terms have been agreed and the parties’ subsequent conduct indicates this; and
- the subsequent conduct of the parties is relevant in proving the existence of a contract and its terms.
Value
This case serves as an important reminder that, in the interests of certainty, all parties should sign an agreement before any work starts as even where an agreement includes formal requirements for acceptance, the parties’ conduct may show that these requirements
