Unsuitable contracts: incomplete, but binding nonetheless

In today’s fast-moving commercial world where email negotiations abound, and particularly in spot-market transactions such as the crude oil trading that was the subject of Proton Energy Group SA v Orlen Lietuva, it is all too easy for parties to become inadvertently bound to unsuitable contracts.

In this case the claimant sent an email to the defendant making a ‘firm offer’ for the sale of oil to a certain specification; setting out certain key terms; and demanding a same-day response. In a subsequent exchange of emails the claimant agreed that ‘other contractual terms not indicated… shall be discussed and mutually agreed’. On the same day, the defendant responded by email saying ‘confirmed’.

Some days later the relationship between the parties broke down and the claimant alleged that the defendant had committed a repudiatory breach of contract. The defendant argued that no contract had been formed. In the alternative, it alleged that if there was a contract it contained an implied condition precedent that the oil must not be from Iran (which was a matter about which the defendant had expressed concerns during the email exchange). Further in the alternative the defendant argued that it would have been entitled to reject the oil under section 13 of the Sale of Goods Act 1979 (SGA) in any event, because it differed from the emailed specification…

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