Conditions - Diesel - Formation of contract - Offer and acceptance

Immingham Storage Co Ltd v Clear Plc: CA (Civ Div) (Sir Anthony May (president QB), Lady Justice Arden, Mr Justice David Richards): 9 February 2011

The appellant company (D) appealed against a decision that a contract for the storage of derv at the fuel storage facilities of the respondent (C) had been made in the course of email exchanges between the parties.

C provided storage facilities for petroleum and petro-chemical products. D was engaged in trading various commodities including fuel. D enquired about commingled storage space for ultra-low sulphur diesel at C’s terminal.

There were email exchanges about the availability of storage capacity and likely costs. C sent D a quotation by email for a 12-month storage period. C attached its general storage conditions.

The quotation provided for a formal contract to follow in due course. D confirmed that it wished to proceed and faxed back a signed copy of the quotation. C then sent a ‘contract confirmation’ accepting D’s offer to take up derv storage and stating that a ‘full contract’ would be sent to D to be signed and returned. C then sent D a contract to be signed.

The signed contract was never returned to C. D was unable to source the appropriate fuel for commingled storage and made no delivery to C’s terminal.

C claimed its storage charges and the judge held that a contract was made by the contract confirmation email.

D submitted that the signed quotation was not an offer capable of acceptance because it stated that a formal contract would follow in due course; secondly, and in any event, C’s email could not constitute an acceptance, because it provided for a ‘full contract’ to be subsequently prepared and signed.

Held: (1) If the documents relied on as constituting a contract contemplated the execution of a further contract between the parties, it was a question of construction whether the execution of the further contract was a condition of the bargain or whether it was a mere expression of the desire of the parties as to the manner in which the transaction already agreed to, would in fact go through, Von Hatzfeldt Wildenburg v Alexander [1912] 1 Ch 284 Ch D applied.

The only conditions to which C’s quotation was expressed to be subject were board approval by C and confirmation of tank availability.

Both were certain, required no further discussion or negotiation between the parties and required action only by C. They could be, and were, swiftly satisfied before C’s acceptance of D’s offer.

They were conditions precedent of an entirely conventional type, consistent with an intention that, once satisfied and once C communicated its acceptance, a contract would exist between the parties on the terms of the quotation. The judge was right to draw attention to the absence of a condition such as ‘subject to contract’.

The terms on which the quotation was signed (‘We hereby accept the terms of your quotation subject to your board approval’) made clear the limited conditionality.

Those factors pointed overwhelmingly to an intention to create a contract if C accepted D’s offer. Set against those factors, the provision that a ‘formal contract will then follow in due course’ did not indicate that C’s acceptance of the signed quotation would be no more than an agreement subject to contract.

It was merely an expression of the parties’ desire as stated in Von Hatzfeldt Wildenburg (see paragraphs 25-26 of judgment).

(2) That conclusion was not inconsistent with the definitions of ­‘agreement’ and ‘particulars’ in the general storage conditions.

The terms of the quotation provided that the general storage conditions ‘shall be deemed to apply to this quotation’.

The quotation, once signed by the customer and accepted by C, could constitute the particulars, as defined (paragraps 27-28).

(3) The reference in the confirmation email to sending a ‘full contract’ did no more than carry forward the provision in the quotation that a ‘formal contract’ would follow in due course.

It did not introduce a variation to the terms of the offer, but corresponded with them.

Just as the provision for a ‘formal contract’ did not prevent the signed quotation from being an offer to contract, so the reference to a subsequent ‘full contract’ did not prevent the email from being an acceptance of the offer which immediately created a contract.

Further, the reference to a full contract had to be read in the context of the entire email, which strongly supported the conclusion of a contract at that stage.

If the formal contract was inconsistent with the quotation or contained additional provisions, D would not be bound to accept them.

As it was, the suggested points of difference were immaterial (paragraphs 29-31).

Appeal dismissed.

Dov Ohrenstein (instructed by Zatman & Co) for the appellant; Paul Infield (instructed by Morrisons) for the respondent.