Benefits of formal agreements

Posted: 16th November 2012

lab equipmentA Court of Appeal ruling has underlined the wisdom of employing professionals to draft commercial contracts rather than relying on informal exchanges of emails. Lengthy and costly litigation was necessitated after emails failed to make clear the intentions of the parties or whether there had in fact been a concluded agreement.

Air Studios (Lyndhurst) Limited (Air Studios) had wished to purchase certain second hand electronic equipment from Lombard North Central Plc. (Lombard) at a price of £100,000. Air Studios argued that a binding contract had been agreed through an exchange of emails. Lombard insisted that there had been no concluded agreement and that, even if there had been, the contract was void for uncertainty.

After a detailed analysis of the email traffic between the parties, the court accepted Air Studios’ case that a contract had been concluded and that its terms were sufficiently certain to be enforceable. After Lombard had repudiated the contract, Air Studios had been entitled to terminate it and sue for damages.

Air Studios was awarded £40,753 damages, representing the difference between the contract price of £100,000 and the cost of obtaining the nearest equivalent second-hand equipment on the open market, together with interest.