Do You Want to Have a Binding Agreement? High Court Case Shows Importance of Agreeing All Terms
In order for there to be a binding agreement, there needs to be acceptance by one party of an offer made by another. Failure to agree on all points would mean that there is no binding agreement.
Lack of agreement over any of the terms could mean that there is no binding contract.
The Facts
Caroline Gibbs made a claim for damages against Lakeside Developments over a dispute. A hearing date had been set for 6 April 2016. The parties tried to reach a settlement before the hearing. Ms Gibbs wrote to Lakeside offering to settle for £90,000 on condition that her offer was accepted by 9 March and the settlement sum was paid by 16 March.
Lakeside emailed purporting to accept the offer from Ms Gibbs, but the draft settlement agreement said the settlement sum would be paid by 8 April (rather than 16 March).
Ms Gibbs responded that she was not accepting this because of the later payment date than her deadline. She said the payment had to be made by 16 March. Lakeside responded to say that it would continue with the appeal hearing, set for 6 April.
Ms Gibbs later sought to claim that her settlement offer of £90,000 had been accepted by Lakeside. She said the date in the draft settlement agreement had been a technicality and was immaterial.
The High Court Decision
The Court ruled that there had been no agreement between the parties. Ms Gibbs' offer had been a package and both parts had to be accepted by Lakeside, but this was not the case. There had been no agreement between the parties as to one aspect: when the payment would be made.
When Lakeside emailed with a different payment date in its draft settlement agreement, this amounted to a counter-offer. The initial response from Ms Gibbs showed that she had understood this to be the case.
In order for there to be a binding agreement, there needs to be acceptance by one party of an offer made by another. Failure to agree on all points would mean that there is no binding agreement.
Comment
A party who is looking to enter into a contract cannot accept only some bits put forward by the other party and expect that there is now a binding agreement. Disagreeing with any part of the offer means that their response amounts to a counter offer. That counter offer would need to be accepted by the first party in order to have a binding legal agreement. Acceptance can be by signing something, an email or some other conduct, but there needs to be something that shows the parties are agreed. If there is not agreement, it may not be possible to enforce the terms.
This issue comes up in the so-called 'battle of the forms', where a supplier will put forward their terms and conditions of supply, and the purchaser responds with their terms and conditions of purchase, and vice versa. It is often the case that the person who fires the last shot before performance starts, wins the battle of the forms, but sometimes neither party's terms and conditions apply - it all depends on the scenario.
If the terms show that the parties do not agree, it may be hard to show that the parties have actually reached agreement, or a court will have to infer their own terms to give sense to the contract if the parties have gone ahead with a supply and procurement anyway, despite not apparently having agreed on the terms. Such a situation can lead to uncertainty and would best be avoided through discussion and agreement over the terms.