An important case below and one of interest to any business. Do you need to sign a contract to have agreed it and be bound by it? No.
The case below is a good example of a business relying on a banks agreement to provide funding, even though the bank did not sign the contract.
Ambiguity as to when a contract is completed creates fertile ground for dispute. This was illustrated by one High Court case in which an aircraft leasing company won multi-million pound damages after a bank reneged on a binding funding obligation.
The company argued that the bank had committed itself to provide equity funding for the purchase of an aircraft which was to be leased to an airline. The bank accepted that such a transaction had been discussed but denied that any binding agreement had been achieved. The company launched breach of contract proceedings against the bank after the latter withdrew from the venture.
In upholding the company’s claim, the Court found that the contract between the company and the bank was completed even though the former had not countersigned it prior to the latter’s withdrawal. The bank had, by its conduct, indicated its acceptance that an accord had been reached. The contract was intended to create legal relations and was subjectively understood to be legally binding.
In those circumstances, the bank’s withdrawal amounted to anticipatory repudiatory breach of the contract. The Court’s ruling entitled the company to compensation for losses it suffered as a result of the breach, including loss of profits that it would have made had the venture proceeded. The amount of its award had yet to be finally calculated but was bound to run well into seven figures.
