ED&F Man Commodity Advisers Ltd & Anor v Fluxo-Cane Overseas Ltd & Anor

Summary judgment may determine whether an oral agreement was made where the relevant discussions are fully transcribed, the parties ask the appellate court to decide the issue on that material, and a further trial is unlikely to add anything material. Such cases are unusual, and the ordinary position is that formation of an oral agreement is decided at trial.

For a contract to arise from conduct, the conduct must be referable to the alleged agreement or inconsistent with there being no agreement. Conduct equally consistent with a contract and no contract cannot establish one. Participation in negotiations, or a shared commercial hope that parties will co-operate, does not itself amount to a legally binding promise. The absence of clear words or conduct intended to have legal effect was decisive.

ED&F Man Commodity Advisers Limited and another appealed from Walker J’s ruling under Part 24, reported at [2008] EWHC 1997 (Comm). The issue was whether telephone and round-table discussions on 17 January 2008 produced a legally binding agreement between Fluxo-Cane Overseas Limited and another and the participating sugar brokers.

The alleged agreement was that the brokers would not act individually to close out Fluxo’s positions before a further meeting on 18 January. The judge held that there was a provisional or conditional contract and an interim binding agreement. On appeal, the parties accepted that the Court of Appeal should decide the issue from the transcript rather than order a further trial. The central question was whether the discussions and surrounding conduct objectively established the alleged interim contract.

1. Appeal allowed. The Court of Appeal declared that no binding agreement had been reached on 17 January 2008 under which the participating brokers would refrain from further individual action in closing out Fluxo’s positions until the following day’s meeting.
2. Although oral contract formation will ordinarily require a trial, the court could decide the issue summarily here. The discussions had been transcribed, the parties invited a final decision on that material, and further evidence was unlikely to assist Fluxo’s case. This was an exceptional use of Part 24 and was not encouragement to determine oral formation issues summarily as a matter of routine.
3. Evidence of subsequent conduct was relevant to whether a contract had been made and to identifying its terms. The distinction between using subsequent conduct to establish agreement and using it to construe an already concluded written contract was material. The court relied on GNER v Avon Insce [2001] 2 Lloyds Reports 649 in applying that distinction.
4. The surrounding circumstances and transcript showed negotiation and a common hope of coordinated action, not a promise intended to have legal effect. Brokers remained concerned about obligations to the Exchange, some acted individually during the meeting, and several required an immediate commitment that margin already owed would actually be paid. Fluxo did not give that commitment and expressly recognised that the brokers retained their rights.
5. Where a contract is said to arise from conduct, the conduct must be referable to the alleged contract or, at least, inconsistent with there being no contract. If the parties would or might have acted in the same way without the alleged contract, formation is not established. The Court applied the reasoning in The Aramis [1989] 1 LLR 213.
6. A proposed conditional agreement was too uncertain. No sufficiently specific plan had been agreed, and the word commitment did not necessarily mean a legally binding promise. The appeal was therefore allowed, and the issue was not remitted for trial.

• Court of Appeal (Civil Division): Appeal allowed. The court set aside the Part 24 ruling and declared that no binding agreement of the alleged kind had been made: [2009] EWCA Civ 406.
• Queen’s Bench Division, Commercial Court: Walker J determined under Part 24 that a provisional or conditional contract and an interim binding agreement had been reached: [2008] EWHC 1997 (Comm).