Grant v Bragg

A contract for the sale of shares may arise before a contemplated formal document is signed if the parties’ objective intention has changed so that they are immediately bound. The usual inference that signature is required can be displaced by the parties’ words, conduct and commercial circumstances.

An earlier communication which merely invites agreement to a sale, or records an intention to proceed, does not necessarily amount to an offer or concluded contract. Contract formation remains a matter of objective analysis.

The claimant and defendant each held half the shares in a quasi-partnership company. Following serious disagreements and the claimant’s illness, the defendant sought to acquire the claimant’s shares under a shareholders’ agreement.

The claimant alleged that a binding contract arose through earlier correspondence, an oral conversation, or later correspondence incorporating an agreed draft share sale agreement. The defendant denied that any contract had been concluded and brought a counterclaim for breach of the shareholders’ agreement.

The central issues were whether and when a contract for the sale of the shares arose, whether the claimant should be permitted to amend his pleading, and whether the defendant had established loss on his counterclaim.

1. The mere triggering of the relevant provisions of the shareholders’ agreement did not itself create a contract. It appointed an agent and contemplated a subsequent share sale.

2. The letters of 2 and 9 January 2007 did not create a contract. The first was not an irrevocable offer by the defendant and was, objectively, more akin to an invitation to treat. The claimant’s response also showed that further contractual documentation and details remained to be agreed.

3. The conversation in the taxi on 19 January 2007 was a firm statement of intention, but not a concluded contract. The parties contemplated a further agreement regulating the sale and the claimant’s future activities.

4. The e-mail of 30 January 2007, written by the defendant’s authorised agent, constituted an offer to purchase the shares on the terms of the agreed draft. The claimant accepted that offer by e-mail on 2 February 2007. Although the draft contemplated signature, the surrounding circumstances objectively showed that the parties intended to be bound immediately once the wording was accepted. No term required signature as a condition of contract formation. The February Contract was therefore concluded.

5. Permission was granted to amend the Particulars of Claim to plead the February Contract. The amendment caused no forensic prejudice, although the defendant was entitled to substantial costs protection because the amendment was made only during closing submissions.

6. The defendant’s counterclaim failed. Any recoverable loss under the shareholders’ agreement had to arise from obligations stricter than the claimant’s fiduciary duties and had to be proved as an independent loss. The defendant failed to establish such loss. His exclusion of the claimant from the company was also a repudiatory breach of the agreement, which the claimant accepted.