Who needs a signature to prove a binding contract?

Earlier this month, the High Court held that a buyer’s conduct in respect of a contract for the supply of cotton was sufficient to bind that buyer to the contract, despite its failure to follow the acceptance process detailed in the contract itself.

In summary of the facts, the draft contracts contained a signature block which included the words “accepted [buyer]” and a requirement that the buyer return a signed copy. The buyer did not sign the contracts but did convey numerous instructions to the seller, asking it to set the purchase price of the cotton, in accordance with the contract, which the seller did.

The buyer subsequently argued that, because it had failed to follow the process detailed within the contract, there was no valid acceptance of the seller’s offers and no contract was formed.

Applying the authority of Maple Leaf Macro Volatility Master Fund v Rouvroy [2010] 2 All ER 788 CA, the Judge held that the presence of the word “accepted” above the space for signature combined with the reference to the signed copy to be returned did not “introduce either prescription or conditionality”. Furthermore, even if it had, the prescribed acceptance terms are there for the benefit of the offeror who is at liberty to waive or vary the terms.

It was therefore held that, even if the buyer’s acceptance was not in the prescribed form, either (a) the seller had unequivocally waived that requirement through its subsequent emails; or (b) the seller was entitled to treat the buyer’s communications as a counter-offer to contract on those terms, which the seller accepted in correspondence.

Once again, this case shows the Courts’ willingness to look behind a contract and to analyse and enforce the parties’ conduct. Take special care when negotiating contractual terms…

A Ltd v B Ltd [2015] EWHC 137 (Comm), 2 February 2015

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