Immingham Storage Co Ltd v Clear PLC [2011] EWCA Civ 89
Immingham provides storage facilities for petroleum and petrochemical products at its terminal at Immingham. Clear was engaged in trading commodities, including fuel. Clear entered into negotiations with Immingham for the storage of ultra low sulphur diesel. On 19th Dec 2008, Immingham sent a quotation to Clear which was stated to be "subject to board approval and tankage availability". All key contractual terms were included and there was a statement that other terms would be "as per our General Storage Conditions". The final sentence of the quotation was "A formal contract will then follow in due course". A copy of the General Storage Conditions was attached. On 5th Jan 2009, Clear faxed a copy of the quotation countersigned by Clear to Immingham who responded confirming receipt and saying that it would now seek its own internal board approval and availability of the necessary capacity. On 9th Jan, Immingham sent an email stating "We are delighted to accept your offer..... in further confirmation of the above, our full contract for this business will now be raised over the next few days by our Head Office and sent for your signature and return". Contracts were sent to Clear but, in the event, were never signed and returned by Clear – because Clear was unable to source the appropriate fuel for the storage. Immingham brought an action against Clear for non-payment of invoices, on the basis that a contract was brought into existence by its acceptance of Clear's offer on 9th January. Clear argued that its return of the quotation was not an offer capable of acceptance because of the reference to a subsequent formal contract. And even if it was such an offer, Immingham had not accepted it because it stated that its full contract would now be raised.
The Court of Appeal agreed with the High Court and held that a contract had come into existence. The 18th Dec quotation contained all the relevant terms. The only conditions to which the quotation was expressed to be subject were board approval and confirmation of tank availability. Both were certain and required no further negotiation. The intention was that once the conditions were satisfied and once Immingham communicated its acceptance, a contract would exist. It was relevant that words such as "subject to contract" were absent. These factors overwhelmingly pointed to an intention to create a contract if Clear accepted Immingham's offer. The provision that a "formal contract will then follow in due course" did not indicate that Clear's acceptance of the signed quotation would be no more than an agreement subject to contract. It is "a mere expression of the desire of the parties as to the manner in which the transaction already agreed to, will in fact go through". For the same reasons, the reference to "a formal contract" in the acceptance by Immingham in the 9th Jan email did not prevent the email from being an acceptance which immediately created a contract. Furthermore, the reference to a formal contract had to be read in the context of the entire email, and that email strongly supported the conclusion of a contract at that stage.
Note that saying that a formal contract would follow was not the same thing as saying "subject to contract". All cases like this are decided on their particular facts, but this case shows how important it can be to mark documents and correspondence "subject to contract" if control is to be retained over timing of the creation of a contract.
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