Was There a Contract? What Did the Provision That 'a Formal Contract Will Then Follow in Due Course' Mean?

Understanding just when parties have entered into a binding contract is not always straightforward. The case of Immingham Storage Company Ltd v Clear plc [2011] EWCA Civ 89 which came before the Court of Appeal provides an example of what can happen if contract negotiations are not expressly stated to be "subject to contract."

The Facts

The claimant, Immingham Storage Company Limited ("Immingham") provides storage facilities for petroleum and petro-chemical products. The defendant, Clear Plc ("Clear"), was a commodities trader. In October 2008, Clear made enquiries of Immingham regarding diesel storage space at Immingham's terminal. Following a site visit, the parties exchanged a series of emails regarding storage availability and likely costs.

Significantly, on 19 December 2008 Immingham emailed Clear offering storage space from 1 May 2009 and attaching a quotation for Clear to sign. Immingham requested Clear's confirmation by 3 January 2009.

The quotation was headed "Subject to board approval and tankage availability" and set out essential details including the parties' names; a description of the goods; the location, capacity and type of storage facilities; the commencement date and minimum storage period, and the monthly charge. The quotation stated that "all other terms will be as per our "General Storage Conditions" Version 2008 which shall be deemed to apply to this quotation". The final sentence of the quotation was "A formal contract will then follow in due course".

The quotation was signed by Immingham and contained a space for signature by Clear under the words "we hereby accept the terms of your quotation subject to your Board approval". The General Storage Conditions version 2008 was attached to the email.

On 5 January 2009, Clear emailed Immingham confirming that Clear wished to proceed and that the quotation had been signed on behalf of Clear and returned by fax. Immingham replied that day confirming receipt of the faxed quotation and advising that Board approval would be sought and availability of storage capacity would be investigated.

On 9 January 2009, Immingham emailed Clear under the subject heading "Contract Confirmation" accepting Clear's offer and stating that a full contract would be sent for signature and return.

Immingham sent the formal contract to Clear but it was never returned. Clear was unable to source the appropriate fuel for storage and made no delivery to Immingham. Immingham invoiced the monthly storage...