Contract By Conduct: A Reminder From The Commercial Court

In the recent case of Reveille Independent LLC v Anotech International (UK) Ltd [2015] EWHC 726 (Comm), the English Commercial Court has ruled that even where a contract clearly contains completion formality requirements, the conduct of the parties may amount to a waiver of those requirements and both acceptance of the offer and communication of acceptance.

Background

The claimant, a US-based television company, had entered into a "deal memorandum" with the defendant cookware distributor, pursuant to which the claimant would license to the defendant certain intellectual property rights, pertaining primarily to the MasterChef US brand, and promote the defendant's products in its television series.

The deal memorandum was expressed not to be binding until signed by both parties and was intended to be replaced by a long form agreement, which was never concluded as negotiations broke down.

The defendant claimed that it was not bound by the terms of the deal memorandum. The claimant had not signed the document and therefore not accepted its terms. The question for the court to consider was whether the claimant's conduct was sufficient to amount to a waiver of the requirement for signature and whether acceptance by conduct had occurred and been communicated to the defendant.

Additionally, the defendant argued that the agreement was subject to a condition precedent which had not been fulfilled. On signing the deal memorandum, the defendant had included a manuscript note that a "branding conflict" with the chef, Gordon Ramsay, had to be resolved.

Acceptance by Conduct

It is an established principle of English contract law that the signature of the parties to an agreement is not a prerequisite to the existence of contractual relations. Typically, where the contract prescribes acceptance to be communicated in a specific fashion, this will be binding; however, following the decision of the Commercial Court, the conduct of the parties can indicate acceptance and a clear intention to be bound.

In the present case, the judge found that the requirement for the parties to sign the contract was expressed to be for the benefit of the claimant only. Consequently, the court held, the claimant alone could waive the requirement.

The judge found that the claimant had indeed waived the requirement. The claimant had integrated the defendant's products into television episodes as required and had given the defendant the right to use of the intellectual property...