In the ever changing business climate we recognise that our clients require peace of mind when entering into contracts with 3rd parties. That is why we at Jackson Boyd Lawyers ensure that we keep up to date with decisions from the court. In an interesting case published today, Scanmudringas AS v James Fisher MFE Ltd Lord Tyre considered whether or not the Pursuer’s contractual terms of payment was varied by agreement between the Pursuer and the Defender and found that it had.
In coming to this decision the court considered the principles it needed to apply in determining whether a binding contract had been concluded between parties.
“Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement”.
The court then explained that the present case was concerned not with whether a binding contract was created but rather with whether a subsisting binding contract was varied by agreement. It stated that the case law on creation of a contract was of assistance in respect of variation to the extent that in both circumstances it was open to the court to have regard to performance as a factor in determining whether the contract was concluded or varied, as the case may be.
Finally the court was advises that the parallel was not exact because in the case of variation there is the further possibility that performance has been rendered under the original contract terms. Lord Tyre noted that Lord Justice Clerk Cullen delivering the opinion of the court in Minevco Ltd v Barratt Southern Ltd (above) at paragraph 16 stated:
“It is not in question that a clause of a written contract cannot be varied or altered by verbal agreement. However, the position may be different if there are facts and circumstances which are explicable only on the basis that there was an express or implied agreement. As Lord Robertson observed in Baillie v Fraser (1853) 15D 747 at p 750: ‘It is a delicate thing to infringe on the terms of a written contract, but when the parties have been acting so as to alter it by their conduct, then we must give effect to the change’.”
Rather than seeking the advice of Noel Edmunds when deciding on your options, why not contact Jackson Boyd Lawyers who would be happy to assist you navigate the murky waters of a contractual dispute.
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