Legal formalities for an enforceable guarantee

Golden Ocean Group –v- Salgaocar Mining Industries (2012) CILL. Court of Appeal

Facts

Golden Ocean was asked to charter one of its ships to Trustworth Shipping Limited and during the negotiations a related company, Salgaocar, allegedly stated in the course of an email exchange that it would guarantee Trustworth’s performance.

The parties subsequently fell out and Golden Ocean brought proceedings on the alleged guarantee.  The defence was that a chain of emails is not the same as a formal legal document and that an email signature is not the same as a signature written by a live person with a pen.

The Court of Appeal held:

That the effect of the Statute of Frauds does not restrict it to the circumstances of 1677 (where there would be a single document and signatures by quill pens).  People in the shipping industry are used to forming agreements by exchanges of emails, and the purpose of the Statute was simply to ensure that the documentation was properly recorded and clearly accepted by the guarantor. The Court concluded that under modern circumstances an email string with electronic signatures is capable of complying with 17th Century law and thus creating an effective and enforceable guarantee.

For more information help or advice please contact Rob Langley on 0191 211 7975 or email [email protected].