Allianz Insurance Company- Egypt v Aigaion Insurance Company SA

Contractual formation is determined objectively from the parties’ communications and the surrounding circumstances. Strong indications of finality may show acceptance, even where the accepting message refers to terms previously quoted that differ from the latest document. A definitive slip containing the agreed terms may prevail over an earlier quotation, particularly where the response states that cover is bound and gives no indication of a counter-offer. The contract formed on that basis does not include a material term omitted from the definitive slip merely because that term was previously stipulated and agreed. Any issue of rectification is separate and was not decided.

Allianz sought to establish liability under a marine reinsurance arrangement for the constructive total loss of the tug Ocean Dirk. During email negotiations, Aigaion had required an IACS class warranty. The final slip sent by the broker omitted that warranty, although it reflected the agreed rates, share and other terms. Aigaion then emailed that cover was bound, referring to the rates as previously quoted. The Commercial Court, in [2008] EWHC 1127 (Comm), held that a contract had been formed. Aigaion appealed, arguing that its message was a counter-offer because the quotation included the omitted warranty. The central issue was whether the final exchange created a contract and, if so, on what terms.

1. Appeal dismissed. Aigaion was bound as reinsurer, subject to the terms of the slip, in respect of the Ocean Dirk loss.
2. The IACS warranty could not be read into the slip offer. The slip was intended to be the definitive reference point for the contractual terms pending any policy document. The omission was not something a reasonable offeree could correct by construction. The position would have been different only if rectification were established; that issue was not decided.
3. The email exchange had to be construed objectively. The references to the slip, the request for it for agreement, the request for confirmation, and the statement that cover was bound created strong mutual indications of finality. A reasonable reader would understand Aigaion’s message as accepting the terms of the slip, not making a counter-offer.
4. The reference to terms previously quoted, followed by the agreed rates, did not alter that conclusion. Although the earlier quotation had been made on the basis of the IACS warranty, the final email spoke by reference to the slip and contained no indication that agreement was conditional upon the slip accurately reproducing the earlier quotation. The contract therefore existed, but without the IACS warranty.
5. The court was not required to decide whether rectification could subsequently insert the omitted warranty. Rix LJ declined to accept a bare submission that rectification could never assist because the law could not rectify an offer rather than a contract. Aigaion did not argue that mutual mistake rendered the apparent contract void.

Moses LJ and Laws LJ agreed with Rix LJ.

1. Court of Appeal (Civil Division): Appeal from the Commercial Court dismissed. The court held that the email exchange formed a contract on the terms of the slip, without the omitted IACS warranty: [2008] EWCA Civ 1455.
2. Commercial Court, Queen’s Bench Division: His Honour Judge Chambers QC decided the underlying dispute in [2008] EWHC 1127 (Comm). The Court of Appeal upheld the conclusion that the 2 April email was intended to close the deal, while supplying the necessary reasoning on the contractual terms.