Newbury v Sun Microsystems
The courts have recently reminded us of the need to take care when making offers to settle during a dispute. In Newbury v Sun Microsystems (2013) there was a dispute over commission payable by one party to the other. Prior to the trial commencing, the Defendant’s solicitors wrote to the Claimant’s solicitors offering to settle. The Claimant’s solicitors responded accepting the settlement.
The parties then got into a dispute over the form of the Settlement Agreement which in turn led to a dispute over whether or not a binding contract was entered into when the Claimant accepted the Defendant’s offer. The Defendant argued that the offer (and acceptance) to settle did not constitute a binding contract as further terms were still to be agreed and a formal agreement to be signed. They argued that the words in their offer letter stating that “such settlement to be recorded in a suitably worded agreement” meant that the details were still to be agreed and, as such, a contract had not been formed.
The court rejected this argument and held that a contract had been formed when the Claimant’s solicitors responded accepting the offer. The words relied upon by the Defendant were not a reference to terms still to be negotiated and agreed. Furthermore, the Defendant’s letter was not expressed to be “subject to contract” and if it had, the position would have been different.
This case is also a good reminder to take care that you do not inadvertently enter into a contract generally simply by exchanging letters, emails etc. If you are making or accepting an offer to do business with a third party but there are still details to negotiated, the use of the phrase “subject to contract” is prudent.
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