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HIGH COURT RULING ON FORMATION OF CONTRACT

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The High Court has recently upheld the basis of a contract between two companies as that of an oral agreement, rather than that of a written contract, which mistakenly contained different terms.

Two companies had agreed orally for the delivery of freight, and payment was made in accordance with their agreement. However, when a written contract was drawn up to record the arrangement, the broker named the parent company of one of the parties in the contract, by mistake, instead of the subsidiary.

The High Court looked at the matter objectively and concluded that, as the arrangements so far had actually been carried out by the subsidiary, it was the subsidiary that was bound by the contract and not the parent company.

The question was relevant as a dispute had arisen as to the payment of demurrage fees incurred to the freight owner. This question will now be referred to arbitration.

Companies are always advised to have their business contracts professionally drafted by a commercial or corporate solicitor who will also be able to advise on the practical effects of the contract terms.

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Written by Andrew Hodges

June 3, 2011 at 9:52 am

Posted in Comment, LinkedIn

Tagged with , ,

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