Air Studios (Lyndhurst) Ltd (t/a Air Entertainment Group) v Lombard North Central Plc

A contract may be binding even though the parties contemplate a later formal document. The question is objective and requires the whole course of negotiations to be considered. Further terms remain non-essential unless the parties made agreement on them a condition of formation, or their absence makes the agreement unworkable or void for uncertainty.

For damages for non-delivery of second-hand goods, equivalent second-hand goods may constitute “the goods in question” under section 51(3) of the Sale of Goods Act 1979. A limited supply, probably obtainable only after several months, may nevertheless fall short of an available market. Where section 51(3) does not apply, section 51(2) requires assessment of the estimated loss directly and naturally resulting from the breach. The cost of the nearest equivalent replacement goods may be the appropriate measure.

Air Studios claimed that Lombard had agreed by e-mail on 19 August 2011 to sell it second-hand post-production equipment for £100,000 plus VAT. Lombard contended that the exchanges were subject to a later sale contract, that its standard terms had not been accepted, and that the assets to be sold were uncertain.

Air Studios also claimed damages after Lombard sold the equipment to another buyer. The issues were whether a binding contract had been formed, what its terms were, whether it was void for uncertainty, and how damages should be assessed where comparable second-hand equipment was difficult to obtain.

1. Formation. The 10.20 e-mail was initially expressed “subject to contract” and was not capable of acceptance. The qualification was removed by the 10.50 e-mail stating that the offer was not conditional, although a sale contract would later be required. Objectively, that contemplated a formal record of an already binding agreement.
2. Lombard’s 11.08 e-mail did not introduce a counter-offer or make its standard terms a condition precedent. Read as a whole and against the commercial background, the 15.08 e-mail was a clean acceptance of Air Studios’ offer. The references to an order, invoice address, payment timing and later standard terms concerned implementation and further formalities. They did not prevent immediate contractual effect.
3. The contract covered the equipment identified in the three lease agreements, including the Gemini console, and not merely the items positively identified by Lombard’s agent. It was an “as is” sale for £100,000 plus VAT, with Air Studios responsible for removal at its risk and expense. Unagreed matters concerning title, risk and collection could be dealt with by statute or reasonable implication. The contract was not void for uncertainty.
4. Damages. Under section 51(3) of the Sale of Goods Act 1979, equivalent second-hand equipment could in principle constitute “the goods in question”. However, probable sourcing of suitable equipment through specialist dealers within about three months did not provide a sufficiently ready and reasonably available market. New equipment was materially different from the second-hand goods contracted for.
5. Section 51(2) required assessment of the loss directly and naturally resulting from the breach. It did not require loss of business profits merely because no available market existed. On the evidence, the nearest equivalent second-hand equipment provided the appropriate measure, assessed at £140,735. Judgment was therefore entered for Air Studios for £40,735, being the difference between that figure and the contract price, together with interest.

First-instance judgment. No appellate history was stated in the judgment.