Global Asset Capital, Inc & Anor v Aabar Block S.A.R.L. & Ors

Whether negotiations produced a binding contract must be assessed objectively by reference to the whole course of dealings, including subsequent communications. This approach applies to written, oral and mixed negotiations. The restrictions on using subsequent conduct to interpret an existing contract do not govern the prior question of its formation.

An offer made subject to contract does not become binding merely through acceptance. Waiver of that qualification requires unequivocal agreement. A condition requiring an offer letter to be resent in open and binding form requires the same offer without a continuing contractual qualification. A conditional, expressly non-binding indication of funding support may establish only potential funding, rather than the ability to fund required by an agreement. Conditions requiring performance without an express deadline may require satisfaction within a reasonable time.

Global Asset Capital, Inc, a Delaware company, and Glenn Maud, a property investor, claimed that Aabar Block S.A.R.L. and its indirect parent, Aabar Investments PJS, had agreed to sell them debt interests and associated rights for €250 million. Aabar Block had acquired those interests with Edgeworth Capital, a company controlled by the third defendant, Robert Tchenguiz. The interests included claims against Maud arising from loans and a personal guarantee.

The claimants alleged that Aabar accepted an offer during a telephone conversation, subject to Maud resending the offer letter in open and binding form and providing satisfactory evidence of funding. The original offer was subject to contract. Later correspondence included a revised offer and an expressly non-binding funding letter from Madison International Realty, a proposed financier and joint purchaser.

Walker J dismissed Aabar's applications for summary judgment or strike-out in [2016] EWHC 298 (Comm). Aabar appealed. The central issues were whether subsequent communications could be considered when determining formation, whether the claimants had a realistic prospect of establishing a binding contract, and whether either condition had been satisfied. Tchenguiz's separate application was outside the appeal.

The appeal was allowed and judgment entered for Aabar. Hamblen LJ, with whom McFarlane LJ agreed, held that the claimants had no real prospect of establishing either the alleged contract or satisfaction of its conditions.

1. The court must assess whether a claim has a realistic, rather than fanciful, prospect of success. It must avoid a mini-trial. Where a short question of law or construction can properly be determined on the available evidence, after adequate argument, the court should decide it ([27]).

2. Contract formation must be assessed by examining the whole course of negotiations. The principle in Hussey v Horne-Payne (1878) 4 App Cas 311 applied equally to written, oral and mixed communications. Subsequent dealings could therefore be considered. The restriction on using subsequent conduct to interpret contractual words concerned the meaning of an established contract. Likewise, Perry v Suffields [1916] 2 Ch 187 concerned the survival of an already completed contract, rather than whether one had been formed ([28]–[39]).

3. The pleaded offer was subject to contract, and acceptance alone could not remove that qualification. The alternative analysis of an oral offer by Aabar and acceptance by the claimants was neither pleaded nor realistically supported by the alleged words. Under RTS Flexible Systems Ltd v Molkerei Alois Müller Gmbh & Co KG (UK Production) [2010] UKSC 14, waiver required unequivocal agreement. Requiring an offer to be resent in binding form was inconsistent with an existing agreement that its terms were binding ([40]–[49]).

4. The later letter reinforced that conclusion. It required acceptance, introduced materially different substantive terms and proposed an exclusivity period for further discussions. Those provisions were inconsistent with an existing contract. The pleaded agreement encompassed all the original offer's terms, rather than only its price and purchased rights. The identity of the purchasers was also significant ([50]–[61]).

5. Independently, neither alleged condition had a realistic prospect of being satisfied. Resending the offer required the same offer in open and binding form. The revised letter was a materially different offer requiring acceptance and agreement on final documentation. The funding letter expressed a conditional intention and expressly excluded any obligation to fund. It evidenced only potential funding. It was insufficient on an objective construction and was neither satisfactory to Aabar nor unreasonably rejected on a subjective construction ([62]–[66]).

6. The conditions could be given their natural and ordinary meaning. No relevant factual matrix had been pleaded, as the Commercial Court Guide required, and no relevant background evidence was identified. Satisfaction was required within a reasonable time, which had elapsed. These conclusions independently justified judgment for Aabar ([67]–[71]).

• Court of Appeal (Civil Division): In [2017] EWCA Civ 37 , allowed Aabar's appeal on all three issues and entered judgment for Aabar. Christopher Clarke LJ had granted permission to appeal on 26 April 2016.
• High Court, Queen's Bench Division, Commercial Court: Walker J dismissed the applications for summary judgment or strike-out in [2016] EWHC 298 (Comm) , handed down on 18 February 2016. Only Aabar's applications were the subject of this appeal.