1. Does an agreement made ‘subject to board approval’ constitute an offer capable of being accepted?
In Goodwood Investments Holdings Inc. v Thyssenkrupp Industrial Solutions AG, the purchaser of a luxury superyacht, Palladium, made a claim against the builder for breach of warranty in relation to the yacht’s paint system. A settlement offer, made during the course of a subsequent arbitration, included various terms and proposals, one of which required formal approval of the agreement by the builder’s own board of directors.
The purchaser responded to the offer by confirming its acceptance, but the parties did not execute a formal settlement agreement and in later conversations, the builder insisted that no binding settlement had been concluded. The court was asked to determine whether or not the purchaser’s response to the builder’s offer created a binding and enforceable settlement agreement.
The court recognised that it is possible for parties to conclude a binding contract even where a formal document is to follow and will contain terms which have not yet been agreed. However, the court held that the meaning of the words “subject to contract,” which is well established, is the same as “subject to board approval” – that is, such words indicate that the parties do not yet intend to be contractually bound. …
2. Can a binding agreement be made without the signature of one of the contracting parties?
In IMS S.A. v. Capital Oil & Gas Industries Ltd., IMS’s vessels had been arrested by Access bank which alleged that cargoes of oil due to be delivered on those vessels at the direction of Capital were mis-delivered. IMS sought the losses it had incurred as a result of the arrests under letters of indemnity provided by Capital following the arrests. The parties met to discuss IMS’s claims and IMS alleged that this resulted in the two parties signing separate counterparts of a settlement agreement, which were exchanged by the parties. At trial, however, only one copy was introduced into evidence: IMS’s copy signed by Capital.
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