Case Nos: CL-2023-000206 and CL-2023-000207 - [2025] EWHC 1591 (Comm)

As Leggatt J said in Blue v Ashley [2017] EWHC 1928 (Comm), which concerned an alleged oral contract, the essential elements of a contract are as follows [49]:

It is possible under English law to make a contract without any formality, simply by word of mouth… (i) the parties have reached an agreement, which (ii) is intended to be legally binding, (iii) is supported by consideration, and (iv) is sufficiently certain and complete to be enforceable.

There was no dispute that a contract can be entered into by conduct, and there was nothing significant between the parties as to what must be shown in order to establish that a contract was entered into by conduct.

Specifically, it was not in issue that a contract may be formed in a way which does not, or does not readily, fit the traditional analysis of offer and acceptance, Thus in G.Percy Trentham Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25, Steyn LJ at 29f. said as follows:

[I]t is true that the coincidence of offer and acceptance will in the vast majority of cases represent the mechanism of contract formation. It is so in the case of a contract alleged to have been made by an exchange of correspondence. But [it] is not necessarily so in the case of a contract alleged to have come into existence during and as a result of performance…

The relevant conduct may occur over a period. In Maple Leaf Macro Volatility Master Fund v Rouvroy [2009] EWHC 257 (Comm), Andrew Smith J (who referred to Percy Trentham at [244]) said at [242] that:

[T]he court will, if appropriate, assess a person's conduct over a period and decide whether its cumulative effect is that he has evinced an intention to make the contract.

It may also be the case that, where a contract has been entered into by conduct, it may be difficult to pinpoint the date on which the contract was made. In Finmoon Ltd v Baltic Reefers Management Ltd [2012] EWHC 920, Eder J said at [33] that the impossibility of identifying a specific point in time at which a contract came into existence ‘is inherent in most, if not all, cases of any alleged contract by conduct’.

Helpful guidance as to the sort of conduct which may establish a contract by conduct was given in The Aramis [1989] 1 Lloyd’s Rep 213. There the Court of Appeal considered whether a contract arose between a ship’s owners and the holders of bills of lading signed by the ship’s master. Bingham LJ said as follows (at 224):

The questions to be answered are, I think, twofold: (1) Whether the conduct of the bill of lading holder in presenting the bill of lading to the ship's agent would be reasonably understood by the agents (or the shipowner) as an offer to enter into a contract on the bill of lading terms. (2) Whether the conduct of the ship's agent in accepting the bill or the conduct of the master in agreeing to give delivery or in giving delivery would be reasonably understood by the bill of lading holder as an acceptance of his offer.

I do not think it is enough for the party seeking the implication of a contract to obtain "it might" as an answer to these questions, for it would, in my view, be contrary to principle to countenance the implication of a contract from conduct if the conduct relied upon is no more consistent with an intention to contract than with an intention not to contract. It must, surely, be necessary to identify conduct referable to the contract contended for or, at the very least, conduct inconsistent with there being no contract made between the parties to the effect contended for. Put another way, I think it must be fatal to the implication of a contract if the parties would or might have acted exactly as they did in the absence of a contract.

Stuart-Smith LJ said as follows (at 230):

If their conduct is equally referable to and explicable by their existing rights and obligations, albeit such rights and obligations are not enforceable against each other, there is no material from which the Court can draw the inference. It is only if their conduct is unequivocally referable to or explicable by one or more of the rights or obligations contained in the bill of lading that there is factual material from which the Court can draw the inference that a contract has been entered into between them.

In his oral submissions, Mr Debattista phrased the question to be answered by the Court as ‘was the parties’ conduct sufficiently unambiguous such that it was consistent only with one contract, here the ‘General Agreement’, rather than another contract, here the Charterparties?’. Owners agreed that that was a correct way to put the issue. I am content to proceed on that basis, but with this caveat or clarification. The question of whether there was the ‘General Agreement’ made by conduct depends on whether the conduct was only consistent with the existence of there being such a contract. The fact that conduct may not have been consistent with the terms of an undoubted contract – here the Charterparties – does not of itself show that there was a different contract made by that conduct. That conduct might, for example, have been and remained a breach of the undoubted contract.

The parties also referred to a number of other authorities which give guidance on the weight to be given to different factors in considering whether a contract has been formed.

In relation to the evidence which may be expected if a contract has been concluded, reference was made to Edgeworth Capital v Aabar Investments [2018] EWHC 1627 (Comm), where Popplewell J said at [34]:

… in the twenty-first century the prevalence of emails, text messages and other forms of electronic communication is such that most agreements and discussions which are of legal significance, even if not embodied in writing, leave some form of electronic footprint. Moreover where parties contemplate that they will instruct lawyers to draft detailed written agreements between them, there is a presumption that they intend the terms of their bargain to be those reflected in such carefully drafted agreements, not those in any prior or contemporaneous oral conversation, even in the absence of a boilerplate entire agreement clause.

The Defendants also adduced authority referring to the possibility that the parties might, notwithstanding an earlier reference to negotiations being ‘subject to contract’, nevertheless enter into a binding contract without the conclusion of the formal written contract which had been envisaged. Thus in RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] 1 WLR, the Supreme Court held as follows (at [55]f.):

[T]he question is whether the parties have nevertheless agreed to enter into contractual relations on particular terms notwithstanding their earlier understanding or agreement…

Whether in such a case the parties agreed to enter into a binding contract, waiving reliance on the ‘subject to [written] contract’ term or understanding will again depend upon all the circumstances of the case, although the cases show that the court will not lightly so hold.