Arley Homes North West Ltd v Cosgrave

An unsigned contractual document binds the parties only if, objectively, the offeree has given a final and unqualified assent to the offer. Acceptance may be communicated by conduct, but the conduct must objectively show an intention to accept the proposed terms.

A party with actual authority may bind a company even to disadvantageous terms which they did not fully consider. However, a tribunal must resolve material evidence bearing on assent, the identity of the contracting company, and the alleged agent’s authority. A failure to address those matters makes its conclusion unsafe.

The Claimant, who was managing director of the Respondent and the controlling shareholder of its parent company, claimed unauthorised deductions from wages. He relied on an unsigned 2007 service agreement which provided for 12 months’ sick pay at full pay.

The Liverpool Employment Tribunal held that, although the agreement had not been executed, the parties intended to be bound by it. It found that the Respondent’s finance director had authority to agree it and awarded the Claimant £53,437.71. The Respondent appealed. The central issue was whether there had objectively been a binding acceptance of the unexecuted agreement by or on behalf of the Respondent.

1. Appeal allowed and remitted to a differently constituted Employment Tribunal. The Employment Tribunal’s conclusion that the Respondent was bound by the unsigned 2007 service agreement was unsafe.

2. Acceptance of an offer must be a final and unqualified expression of assent, assessed objectively. Acceptance may be by conduct, but the conduct must clearly have been undertaken with the objectively ascertained intention of accepting the offer. It was not necessary that the alleged agent had read every term. In the absence of fraud or misrepresentation, a party is not relieved from an unfavourable bargain merely because it failed fully to engage with visible contractual terms.

3. The evidence of the finance director was ambiguous. It raised a material question whether further matters, including salary-review and bonus provisions, remained to be discussed rather than whether only formal signature was outstanding. The Employment Tribunal did not engage with that evidence when determining whether there had been unqualified assent to the whole agreement.

4. The Tribunal also failed to resolve whether the increased remuneration and car allowance evidenced an agreement with the Respondent or merely an improvement in the Claimant’s entitlements from the parent company. That distinction also bore on the finance director’s actual authority. The Tribunal needed to address the respective roles of the two companies, the source of any authority, and whose conduct was relied on as acceptance.

5. Those omissions left unresolved whether the Respondent had agreed to the entire agreement, rather than only specified remuneration, allowance and possibly sick-pay terms. The EAT could not safely preserve a separate finding on sick pay. The matter was therefore remitted for fresh determination.

• Employment Appeal Tribunal: allowed the Respondent’s appeal and remitted the claim for fresh determination.
• Liverpool Employment Tribunal: allowed the Claimant’s unauthorised-deduction claim and awarded £53,437.71, having held that the unsigned 2007 service agreement was binding.