Offer and acceptance – can a contract be formed despite a stipulation for signature?

Facts

Reveille is a US TV company which negotiated a contract with Anotech to give publicity in the Master Chef TV series to Anotech’s kitchen products. The parties negotiated a document which stated that it was not to be binding on Reveille until signed by both parties. Despite a lack of signature, Reveille went ahead with placements on its TV programmes in co-operation with Anotech. After 2 years the parties got into dispute and Reveille claimed $1.7m in damages for breach of contract. Anotech’s defence was that the contract had not been signed and therefore it had no contractual obligations.

Court of Appeal Held:

1. There is a need to respect certainty in commercial contracts and so the absence of a signature did create an arguable defence; but this need was completely outweighed by the more important need that the Court should protect the reasonable expectations of honest, sensible commercial business people.
2. The Court therefore determined that a contract had been concluded despite the absence of a signature.
3. Alternatively by its conduct Anotech had waived the lack of a signature on the part of Reveille.

Comment

• Surprisingly Anotech ran this argument as its main line of defence; further it lost in the High Court and went ahead with an appeal to the Court of Appeal which had also lost.
• Although the subsequent conduct of the parties is not admissible as an aid to the interpretation of the contract, IT IS admissible to prove the existence of a contract and the contract terms.
• Where the parties go ahead on what amounts to only a draft contract, even if there are no formalities such as signature, etc, the Court will find the existence of an agreement if essentially all the necessary terms have been agreed and the subsequent conduct of the parties indicates that each of them thinks they are in a contractual relationship.

For more information, contact Robert Langley on 0191 211 7957 or at [email protected].