Contract made in two places at once - a possibility under UK law

by Pillsbury Global Sourcing Practice

The High Court of England and Wales has recently decided that a contract can, in principle, be made in two separate jurisdictions at the same time if the contract does not include choice of law and jurisdiction clauses. In this situation, either party could seek to enforce the contract in its home jurisdiction.

In Conductive Inkjet Technology Ltd v Uni-Pixel Displays Inc [2013] EWHC 2968 (Ch), the court considered a dispute between two parties, one based in England and the other in Texas. The agreement in question was a non-disclosure agreement, which did not include a choice of law and jurisdiction clause as the parties were not able to agree on one during negotiations. The parties agreed the contract in an email exchange, and it was then signed by Conductive Inkjet Technology (CIT) in England and by Uni-Pixel Displays (UPD) in Texas. CIT then claimed that UPD made use of certain proprietary information in breach of the agreement and sought permission to serve claims on UPD in England. UPD challenged this by arguing that English courts did not have jurisdiction in the matter.

To recap the English law position on contract formation, the general rule is that a contract is made at the time and place where acceptance of the relevant offer is communicated to the offeror. There are two main rules as to when acceptance is communicated:

  1. The reception rule applies to relatively instantaneous forms of communication, and provides that time and place of contract is when the acceptance is received by the offeror. This was established in Entores Ltd v Miles Far East Corporation [1955] EWCA Civ 3 and confirmed in Brinkibon Ltd v Stahag Stahl G.m.b.h. [1983] 2 AC 34 (both cases involving telexes). In Brinkibon, Lord Wilberforce commented that: "In the case of successive telephone conversations it may indeed be most artificial to ask where the contract was made..." but he concluded that the courts simply have to do their best with the test.
  2. The postal rule applies to delayed forms of communication, with acceptances being deemed to be effective at the time of sending, provided the offeree correctly addresses and stamps the letter (Adams v Lindsell (1818) 1 B & Ald 681).

However, the High Court in this instance applied the reasoning of Mann J in the High Court case of Apple Corps Ltd v Apple Computer Inc [2004] EWHC 768 (Ch). Whilst Mann J's comments on this point were obiter, Mann J expressed the view in the Apple case that it is possible, as a matter of principle, for a contract to be made in two places at once. Mann J noted: "Where completion takes place at a distance over the telephone, it might well be possible to construct an offer and acceptance analysis (indeed, each party has sought to do so in this case) but it might equally be thought that that analysis is extremely forced and introduces a highly random element. The offer and acceptance may well depend on who speaks first and who speaks second, which is likely to be largely a matter of chance in closing an agreement of this sort. It is very arguably a much more satisfactory analysis to say that the contract was made in both places at the same time."

Mann J also commented that holding the contract to have been made in both places would coincide more closely with the clearly expressed intentions of the parties, namely not to give the other an advantage in terms of governing law and jurisdiction, than would "introducing the somewhat random element of offer and acceptance".

In the CIT and UPD case, Roth J similarly found that the parties had expressly agreed not to incorporate a choice of law and jurisdiction clause, and that it would be wholly artificial to determine the place of the contract by applying the tradition postal rule, depending on which party happened to send the fully executed document. The English Civil Procedure Rules establish the principle that English courts should be able to exercise jurisdiction over foreign defendants where the subject matter of the dispute has a sufficient connection to England, and it would be arbitrary to make a decision as to the connection to English jurisdiction simply on the basis of the order in which a document was signed.

Exclusive jurisdiction clauses in agreements may not be entirely watertight. For example the courts may apply the forum non conveniens test to see whether there are any exceptional reasons for departing from an exclusive jurisdiction clause. However, having an exclusive jurisdiction clause and also a governing law clause in an agreement certainly does reduce the uncertainty that parties may face if a dispute arises and the contract that is silent on the matter.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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