MH Corporate

Friday 4th October, 2013

Are you ready to be bound?

 The recent case of Newbury v Sun Microsystems [2013] EWHC 2180 highlights the importance of including the words ‘subject to contract’ if you do not intend proposed terms of a contract to become binding.

 Against the background of negotiations to settle a dispute, on 03 June 2013, Sun Microsystems’ solicitors wrote the following to Newbury’s solicitors:

 “Our client is willing to settle the entire proceedings by paying the Claimant [Newbury] within 14 days of accepting this offer, the sum of £601,464.98 . . . such settlement to be recorded in a suitably worded agreement. This offer is open for acceptance until 5pm this evening . . .”

The same day, Newbury’s solicitors wrote a letter of acceptance:

 “We thank you for your letter dated 03 June 2013. We are instructed that the Claimant [Newbury] accepts the terms of your client’s offer . . .We will forward a draft agreement for your approval on Tuesday 04 June.”

 A dispute arose about the form and substance of ‘such settlement to be recorded in a suitably worded agreement’. In particular, Sun Microsystems wanted the ‘suitably worded agreement’ to both modify and supplement the terms set out in their 03 June 2013 letter.