Contracts: Keeping Formalities To A Minimum

Commercial Thinking

A feature of English contract law is the willingness of the court to recognise the realities of commercial life. These realities often result in contracts, or perhaps alleged contracts, being in anything other than a neat and tidy document which has indisputably been signed by duly authorised persons. The Commercial Court demonstrated this in the case of Golden Ocean Group Limited v Salgaocar Mining Industries Pvt Limited, Mr Anil V. Salgaocar [2011] EWHC 56 (Comm). The dispute related to the chartering of a ship and a guarantee of the charterer's obligations and the court had to consider a range of questions regarding contracts and guarantees which could easily relate to any number of commercial transactions. The court proceedings were brought in order to determine whether the Claimant, Golden Ocean Group, had an arguable case and, if so, that it should be permitted to issue proceedings in the English courts and serve them on the defendants in Goa. The judgment, therefore, is not a decision on the substantive issues in dispute.

There had been a series of emails passing between a firm of shipbrokers and Golden Ocean Group on the one hand and between the same firm of shipbrokers and Mr Salgaocar on the other hand. These emails were the process by which Mr Salgaocar negotiated with Golden Ocean Group for the charter of a ship by Golden Ocean Group to a company called Trustworth and with the intention that the obligations of Trustworth would be guaranteed by Salgaocar Mining Industries (SMI). All emails were to and from the shipbrokers. The final emails indicated that all the terms of the charter agreement had been agreed. A formal charter agreement was then drawn up but was never signed.

The court had to decide whether there was an arguable case that a contract for the charter of the ship had been made and that the obligations of the charterer, Trustworth, had been guaranteed by SMI. If there was a guarantee then further questions arose as to whether the requirements of the Statute of Frauds Act 1677 had been complied with. If the requirements had not been complied with, then the guarantee would not be enforceable.

The court had little difficulty in deciding that it was perfectly possible for a written contract for charter to be concluded by way of a sequence of emails in which the proposed terms are set out or referred to and by which outstanding points are negotiated and eventually agreed. In this case the emails did not...