The Supreme Court has ruled that a contract was in force, despite the parties having not signed the relevant document and a clause within the document stating that it only came into force when the parties did so. The contract revolved around a complex deal for RTS to provide and install some machines to Mueller. The parties had initially proceeded based on a letter of intent and then negotiated the main contract. Without signing the document, the parties then proceeded to carry out the contract.
The Supreme Court decided that the parties had acted as if virtually all of the contract was in effect. It ruled that there were just two other possibilities: that there was no contract at all (the Court of Appeal’s position) or that the contract was partially in force (the High Court’s position). The Supreme Court said that the other two possibilities were not credible, so the parties were deemed to have accepted the written contract and waived the requirement for it to have to be entered into in writing.
Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.Upload-IT.com, comments: ‘As highlighted by the Supreme Court, this is a common scenario – agreeing the terms of the contract and then never getting around to signing it. If you want to avoid the costs of going all the way to the Supreme Court and the uncertainty involved with that (as demonstrated by each of three courts taking the three different possible lines open to them), then it’s best to dot the i’s and cross the t’s.’