MasterContract: The Signature Round

The decision of the Court of Appeal in Reveille Independent LLC v Anotech International (UK) Ltd[1] reaffirmed the application of basic contractual principles according with “the reasonable expectations of honest men”,[2] specifically in relation to the performance of contracts where, despite the requirement of signature, the contract is not signed but is acted on by both parties. 

Neither of the parties names in this matter will be instantly familiar to most of us, however their products may be.  Reveille Independent LLC (“Reveille”) is the company responsible for producing MasterChef US, presented by the celebrity chef Gordon Ramsay OBE.  Anotech International (UK) Ltd (“Anotech”) produce and market home cookware under the name “The Cookware Company”.  The case concerned the licencing agreement between the parties which allowed Anotech to produce and market cookware with the MasterChef US branding in exchange for payment to Reveille for such rights. 

When payments were not forthcoming proceedings were brought in the High Court and Reveille sought to establish that there was a binding contract between the parties. Reveille succeeded in the first instance before HHJ Mackie QC in arguing that despite express wording that a signature on behalf of Reveille was required to execute the contract, the contract had in fact been accepted by conduct. 

Anotech had sought to argue that the language of the contract was clear.  The agreement recited that:

“This Merchandising Deal Memo shall not be binding on Reveille until executed by both the Licensee [Anotech] and Reveille.” 

In the absence of such signature the agreement could not be binding.

Anotech appealed the decision of HHJ Mackie QC. In Cranston J’s judgment (with which Elias & Underhill LJJ agreed), he put the question before the Court as follows:

“In what circumstances will a contract result when a written offer document states that it is not binding until signed by the offeree and the offeree does not sign but performs in the manner contemplated by its terms?”[3]

Anotech had, again, attempted to argue that:

“Because Reveille had expressly said that only a signature would be good enough, its conduct was seen as potentially explicable as conduct in anticipation of a contract…”[4]

Their argument thus remained that, put simply, in the absence of the signature there could be no binding agreement. 

Cranston J recited six points that provided the basis on which the facts had to be analysed, noting that these “take effect against the background of legal policies [for instance] the need for certainty in commercial contracts”[5]:

  1. A contract is formed by the acceptance of an offer; acceptance can be by conduct “so long as that conduct, as a matter of objective analysis, is intended to constitute acceptance”;[6]

  2. There need not be a signature, so long as the terms are accepted;

  3. A party who has the right to sign a contract before being bound can waive the requirement “by clear and unequivocal words or conduct”[7];

  4. If a signature is the prescribed mode of acceptance and an offeree then acquiesces to a different mode of acceptance, he will be bound “unless it can be shown that the failure to sign has prejudiced the offeror”[8]

  5. “A draft agreement can have contractual force… if essentially all the terms have been agreed and conduct indicates this”[9]; and

  6. “Subsequent conduct is admissible to prove the existence of a contract and its terms, although not as an aid to interpretation”.[10]

The Court held that there had been a counter-offer made when Anotech returned the Merchandising Deal Memo to Reveille with some minor amendments and despite the lack of signature on Reveille’s behalf, Reveille had waived the prescribed mode of acceptance and, subject to the test of no prejudice to the offeror, a binding agreement had been reached.  

The Court accepted HHJ Mackie QC’s findings of fact (which were not challenged on appeal) that both parties had acted as if they were bound; the following actions being noted: 

Reveille had:

  1. Incorporated Anotech’s products into the programme;

  2. Given Anotech permission to use the Masterchef US branding at a trade show; and

  3. Treated Anotech like one of its licensees by including it in a weekly conference call with other licencees. 

Anotech had:

  1. Actively represented itself as a licensee to third parties;

  2. Provided imagery for editing into the MasterChef programming; and

  3. Detailed in an e-mail that Anotech had to pay Reveille in accordance with the Deal Memo.

The Court upheld the decision of HHJ Mackie;  Cranston J summarised the position in these terms:

“Reveille waived the provision that there would be no binding contract in the absence of its signature on the Deal Memo, and there was no prejudice from this to Anotech.  There was acceptance by conduct on Reveille’s part of the terms of the Deal Memo, leading to a binding contract.  Subsequent conduct on both sides was confirmation of the existence of that contract.”[11]

 

This is not the first (and will probably not be the last) time that litigation has spawned from businesses acting as if they have entered a contract before finalising the terms of their agreement. Ultimately both parties may be regretting not having heeded the words of Lord Clarke in Flexible Systems Limited v Molkerei Alois Muller Gmbh[12]: that it is better to “agree first and start work later”. Ultimately, there is an irony to this case; the lack of a signature caused uncertainty, which was only resolved after costly litigation, however the now well established test that the Court used to resolve the matter (to make a decision which “accords with what would be the expectations of honest, sensible business people”[13]) is not complex or legalistic, but pragmatic and down to earth. Perhaps next time such a dispute arises the parties would be better off, rather than litigating, consulting members of their local business association.



[1] [2016] EWCA Civ 443

[2]First Energy (UK) Ltd v Hungarian International Bank Ltd [1993] BCC 533, Steyn LJ

[3] [2016] EWCA Civ 443, para. 1

[4]ibid, para. 33

[5]ibid, para. 42

[6]ibid, para. 40.  See also Brogden v Metropolitan Railway Co (1877) 2 App Cas 666

[7] [2016] EWCA Civ 443, para. 40.  See also Oceanografia SA de CV v DSND Subsea AS (The Botnica) [2006] EWHC 1360 (Comm); [2007] 1 All ER (Comm) 28

[8]ibid, para. 41

[9]ibid.  See also: RTS Flexible Systyems v Molkeroi Alois Muller GmbH [2010] UKSC 14; [2010] 1 WLR 753

[10]ibid

[11]ibid, para. 53

[13]ibid, para. 53