What? Anyone who has been involved in a commercial dispute, whether in the TMT sector or elsewhere, will be familiar of the care needed in direct discussions with the other side, especially when these concern a potential compromise of the dispute.
So What? The importance of making business-to-business discussions "subject to contract" has been lent further weight by the High Court decision in Thameside Construction Company Ltd v. Arthenella Ltd, a dispute in which it was found that a telephone call between the parties on the eve of trial gave rise to a binding settlement.
After an exchange of formal offers between solicitors, and with a trial little more than a month away, the managing director of Thameside held several calls with his counterpart at Arthenella to discuss the settlement of their dispute. The parties disagreed as to whether these discussions amounted to a settlement, with Arthenella's solicitors writing a letter asserting that no agreement had been reached. The matter was brought before the Court, ahead of trial, for a determination.
The Court came to the view, on the facts (and inevitably much turns on the facts in this type of case) that the conclusion of these conversations was an agreement to settle the parties' dispute for £275,000. The Court took into account a note of the call made by the Thameside director which was emailed to his counterpart shortly afterwards, placing weight on this as contemporaneous evidence. Its view was not swayed by the letter from Arthenella's solicitors, which the Court characterised as "attempting to draw back" from the offer which had in fact been accepted in the call between the parties.
The lessons are simple ones and often repeated, but well worth a reminder:
- firstly, if you want a chance to discuss any deal with your
lawyers before it is finalised, you should make this clear and
ensure that direct discussion with the other side is stated as
being "subject to contract". Beware though that they are
not magic words and must be consistent with the conduct of the
parties; and
- secondly, the case is a reminder that your recollection of a
conversation is far more likely to be accepted if backed up by a
contemporaneous note.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
