Cable and Wireless Plc & Anor v Valentine & Ors

A binding contract may arise even though some matters remain to be agreed, if the parties’ words and conduct objectively show an intention to be bound. The court must read the relevant documents and communications together and identify whether the parties agreed the terms they regarded as essential. An agreement is sufficiently certain where an objective standard or established legal process enables the court, an arbitral tribunal or a mediator to determine any outstanding amount. An unenforceable agreement to negotiate is not created merely because negotiation is contemplated as one means of resolving the issue.

Cable and Wireless Plc and Pender Insurance Limited sought summary judgment on whether exchanges with Willis UK Limited and Willis Management (Isle of Man) Limited had created a binding agreement. The agreement concerned deferring Willis’s joinder to existing misfeasance proceedings. Willis accepted legal responsibility for an employee’s acts and omissions, subject to a qualification that it would bear only a fair share of the resulting loss. Willis argued that the qualification left an essential matter unresolved and amounted only to an agreement to negotiate.

The central issue was whether the signed letter, qualifying email and subsequent telephone agreement, read together, contained sufficiently certain terms and manifested an intention to be bound.

1. Application dismissed. A binding agreement was reached on the terms of the letter of agreement, the qualifying email and the telephone conversation of 25 November 2004.
2. Whether a contract exists depends on the parties’ words and conduct, read in their commercial context. Parties may intend to be bound although some terms remain open, but no contract arises where they made clear that essential terms remained to be agreed.
3. The qualifying email varied, rather than rejected, the letter. It limited Willis’s liability to a fair share of the loss. That variation was accepted and confirmed in subsequent communications.
4. The fair-share term was sufficiently certain. It could be assessed by reference to the parties’ relative responsibility, by analogy with contribution and contributory-negligence assessments under the Civil Liability (Contribution) Act 1978. A court, arbitral tribunal or mediator could determine the amount if negotiation failed.
5. The agreement was commercially sensible and enforceable. The court did not need to determine the alternative arguments concerning admissions.