Midgulf International Ltd v Groupe Chimique Tunisien

An unqualified communication confirming a purchase may objectively accept the whole offer, including incorporated governing-law and arbitration clauses. An acceptance need not repeat every offered term. Additional words do not prevent acceptance unless the offeror would reasonably understand them as introducing a new term rather than clarifying the bargain.

Questions about the formation and terms of a proposed contract are ordinarily governed by its putative proper law. A party repudiates a valid English arbitration agreement by asking a foreign court to declare that the agreement does not exist. The English court may restrain foreign proceedings which seek to bypass or undermine that agreement.

Midgulf offered to sell GCT 150,000 metric tonnes of sulphur. Its written offer incorporated terms from an earlier draft contract, including English governing-law and London arbitration clauses. Following a telephone conversation, GCT sent a fax confirming the purchase but listing only the principal commercial conditions. Midgulf replied that GCT had accepted its offer.

Teare J held that GCT’s fax was a counter-offer, accepted by Midgulf only on the listed conditions. He therefore found that the resulting contract contained no London arbitration clause. Midgulf appealed, seeking an appointment under section 18 of the Arbitration Act 1996 and an injunction restraining GCT’s Tunisian proceedings.

The central issues were whether GCT had accepted the offer containing the arbitration clause and, if so, whether the foreign proceedings should be restrained.

1. Appeal allowed. GCT accepted Midgulf’s offer of 2 July 2008, either during the telephone conversation of 4 July as confirmed by the later faxes, or through the exchange of faxes alone. The resulting contract contained English governing-law and London arbitration clauses.

2. Severability did not answer the formation issue. Because the only reference to arbitration was contained in terms incorporated into the sale offer, Midgulf had to establish an acceptance broad enough to encompass those terms.

3. Although parties may contract on main terms and leave other matters for later negotiation, they must have agreed all essential matters. Agreement on quantity and price alone could not sensibly constitute this substantial sale when quality, delivery and payment remained indeterminate. The more reasonable objective interpretation of GCT’s unqualified confirmation was acceptance of the offer as a whole.

4. GCT’s later fax naturally confirmed an existing purchase agreement. An acceptance need not repeat every part of the offer. The question is whether the offeror would reasonably regard the response as introducing a new term rather than clearly accepting the offer. The reference to a maximum draught of 31 feet “at high tide” clarified an ambiguity rather than expressing disagreement. In any event, Midgulf’s reply confirmed acceptance on that basis.

5. The existence and terms of a proposed contract are ordinarily determined by its putative proper law. The offer expressly proposed an English-law contract, and English law governed whether it had been accepted. This was not a case in which competing putative laws could not be resolved with reasonable confidence.

6. Asking a foreign court to declare that a valid English arbitration agreement does not exist is repudiatory conduct. The court could also restrain proceedings where necessary in the interests of justice. GCT’s Tunisian proceedings sought to undermine the arbitration agreement, while delay and participation in those proceedings did not make relief inappropriate. The decision in The Front Comor [2009] 1 Lloyd’s Rep 413, which concerned Council Regulation (EC) No 44/2001, did not make an injunction incompatible with the New York Convention.

7. The court ordered the appointment of an arbitrator under section 18 of the Arbitration Act 1996 and granted an anti-suit injunction restraining continuation of the Tunisian proceedings. Toulson LJ gave the judgment; Patten and Mummery LJJ agreed.

1. Court of Appeal (Civil Division): Allowed Midgulf’s appeal, held that the contract contained a London arbitration clause, ordered the appointment of an arbitrator and restrained GCT’s Tunisian proceedings: [2010] EWCA Civ 66.

2. Commercial Court: Teare J tried the issue after an expedited trial and held that the July contract contained no London arbitration clause. He continued the interim anti-suit injunction pending appeal.