Mehboob Travel Limited & Others and Pakistan International Airline Corp QBD
Mehboob and the other Plaintiffs were travel companies in dispute with PIA about payment of commission. They entered into negotiations to settle the dispute. A "memorandum of understanding" was signed by PIA and two of the claimants. PIA submitted that the MOU was a binding contract and that all the claimants had been bound by actual or apparent authority.
Not surprisingly, the High Court rejected the claim. There is no full judgment, but the case note provides a useful list of matters to be borne in mind in determining the issue:
- whether there was a binding contract was not a question of the subjective state of mind of the parties, but what they had objectively agreed.
- unless all material terms were agreed, there was not a contract.
- from the point of view of a reasonable person in the same situation, there was no intention to create legal relations. The travel agents were bringing highly complex and high value claims and it was highly unlikely that they would have intended to conclude all matters via an MOU which was rushed and drawn up without lawyers.
- it was material that the words "contract" and "full and final" were missing from the MOU.
- there was no evidence for a finding of actual authority to settle. Having actual authority to negotiate did not mean having authority to settle. This was particularly the case where PIA knew that not all the claimants were even aware of the meeting.
The result seems obvious, but the items taken into account by the court in reaching its decision provide a useful checklist.
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