Immingham Storage Company Ltd v Clear Plc

A contract may arise from an exchange of commercial communications even though the parties contemplate a later formal document. The question is whether, objectively construed, the later document is a condition of contractual formation or merely records how an agreement already made will be formalised. Clear conditions precedent, such as board approval and availability, support immediate contractual effect once satisfied and accepted. A reference to a subsequent formal or full contract does not prevent formation where the earlier document contains the material terms and is not expressed to be subject to contract. Any later document containing additional or inconsistent terms requires the parties’ consent to vary the existing agreement.

Immingham Storage Company Ltd claimed damages from Clear Plc for failure to take up fuel-storage capacity. Following email exchanges, Clear signed and returned a quotation, and Immingham later emailed confirming acceptance and the allocation of storage. A formal storage agreement was subsequently sent but never signed or returned. The trial judge, His Honour Judge McKenna sitting as a deputy High Court judge, held that a contract had been formed and awarded damages of £197,110.77 including interest: [2010] EWHC 1085 (QB).

Clear appealed on the limited issue whether the email exchanges created a contract, relying on the references to a later formal contract and differences between the quotation and that document.

1. Appeal dismissed. The signed quotation constituted an offer capable of acceptance. It contained all terms of significance, incorporated the General Storage Conditions 2008, and was subject only to Immingham’s board approval and confirmation of tank availability. Those were conventional conditions precedent, requiring no further negotiation and capable of satisfaction before acceptance. Their limited wording was inconsistent with an intention that the arrangement remained subject to contract.
2. The reference in the quotation to a formal contract to follow was construed, applying the approach in Von Hatzfeld-Wildenburg v Alexander [1912] 1 Ch 284, as an expression of the parties’ desired method of formalisation rather than a condition of contractual formation. The quotation therefore became contractually effective when signed by Clear and accepted by Immingham.
3. Immingham’s email of 9 January 2009 was an effective acceptance. Its heading, express acceptance of the offer, assurance of storage capacity, and statement that the full contract would be prepared in confirmation of the arrangement showed that a contract was intended immediately. The later document did not introduce a variation merely because it contained minor differences. Any additional or inconsistent term would require Clear’s consent.
4. The remaining arguments were immaterial to the result. Earlier negotiations could properly be considered as background and on the issue of intention to create legal relations. Although the judge considered subsequent conduct, the contract was clearly established from the exchanges of 5 and 9 January alone.

• Court of Appeal (Civil Division): appeal dismissed; the decision that a contract was formed was upheld.
• High Court of Justice, Queen’s Bench Division: His Honour Judge McKenna, sitting as a deputy High Court judge, held that the parties’ communications created a contract and awarded damages of £197,110.77 including interest: [2010] EWHC 1085 (QB).