Establishing a contract: subsequent negotiations and inconsistent intentions

by Allen & Overy LLP

Allen & Overy LLP

When determining whether parties had validly entered into a contract, the Court of Appeal held that it was wrong to disregard subsequent communications which were inconsistent with the existence of a contract: (1) Global Asset Capital Inc (2) Glenn Maud v (1) Aabar Block S.A.R.L. (2) Aabar Investments Pjs (3) Robert Tchenguiz [2017] EWCA Civ 37, 1 February 2017.

In September 2008, property investors Glenn Maud and Derek Quinlan entered into a series of loans to finance their acquisition of an interest in Santander Banking Group’s Spanish headquarters. This financing included personal loans to Mr Maud and Mr Quinlan, which were originally provided by RBS but the interests in which were later purchased by Aabar Block and others. Mr Maud and Mr Quinlan defaulted on payments under the loans and various judgments were obtained against them. Ultimately, when other attempts to settle the liabilities were thwarted, Mr Maud and Global Asset Capital (GAC), an American private equity fund, tried to purchase a package of rights and debt interests (the Aabar Rights) directly from Aabar Block and Aabar Investments (together, Aabar) (the Alleged Contract).

The Alleged Contract

Mr Maud stated that he sent Aabar a letter marked “WITHOUT PREJUDICE – SUBJECT TO CONTRACT” offering EUR 250 million in exchange for the Aabar Rights in April 2015 (the Offer Letter). On 6 May 2015, the CEO of Aabar Investments, Mohamed Al-Husseiny, telephoned Mr Maud in response to the Offer Letter. Mr Maud and GAC (together, Global) argued that it was during this conversation that the Alleged Contract was concluded, subject to two conditions: (i) Mr Maud resending the Offer Letter in “open and binding form”; and (ii) Mr Maud providing satisfactory evidence of his ability to fund the purchase.

On 9 May 2015, Mr Maud emailed Mr Al-Husseiny with two letters, described as “binding and committed letters of finance and offer”, and said that he looked forward to receiving Mr Al-Husseiny’s “confirmation of acceptance of [the] offer during the course of Sunday” so that they could “agree the mechanics of how to progress to completion”. The letter of offer reiterated some of the main terms of the Offer Letter, including the purchase price, but added various additional terms (the 9 May Letter). The letter of finance was from a real estate investment firm, and Global argued that this was evidence of its ability to fund the purchase. Global contended that the two relevant conditions to the Alleged Contract had therefore been met at this point. On 10 May 2015, Mr Al-Husseiny replied, stating that there was no contract.

On 8 June 2015, Global issued a claim against Aabar for a declaration that the Alleged Contract was valid and binding and for specific performance of its terms. A key issue in dispute was whether the court could consider events after the telephone conversation in deciding whether, during that conversation, a contract had been concluded.

Later conduct relevant to whether a contract has been formed

In the Court of Appeal, it was held that the parties’ communications immediately following the 6 May 2015 telephone call should have been taken into account when determining whether the Alleged Contract had been entered into on that date. A court will consider the whole course of negotiations when determining whether a contract has been made, irrespective of whether those negotiations are conducted in writing, orally or by conduct, or by any combination of these methods.

Although the meaning of words used in a contract cannot be interpreted by reference to subsequent events and further negotiations between two parties cannot negate an earlier contract without consent, both of these principles are irrelevant when considering whether a contract had actually been formed in the first place.

Factors inconsistent with the existence of a contract

The Court considered that certain factors in the communications pre-dating the Alleged Contract were inconsistent with the existence of a contract:

  • the use of “subject to contract” wording in the Offer Letter meant that the offer was not open for acceptance by Mr Al-Husseiny on the 6 May call and that any acceptance by Mr Al-Husseiny could only amount to an agreement to agree. The Court stated that it was “well established that dealing on [a “subject to contract”] basis negates contractual intention” and that any supposed waiving of the “subject to contract” status would need to have been unequivocally agreed by the parties; and
  • the fact that one of the conditions to the Alleged Contract was to resend the Offer Letter in “open and binding form”.

Subsequent events and particularly the following factors in the 9 May Letter were also inconsistent with a contract having been made:

  • the reference to the purchase as the “Proposed Transaction” and the fact that certain terms were prefaced with the phrase “Upon your agreement that you are willing to proceed […]”;
  • the inclusion of a term that the letter would expire unless accepted by Aabar within a certain period;
  • the inclusion of terms that were materially different from those terms set out in the Offer Letter; and
  • the inclusion of an exclusivity provision, in which both parties would agree not to pursue any alternative transaction regarding the Aabar Rights for a set period.

In particular, the exclusivity provision was held to be “significant” because it suggested that the parties would engage in negotiations about the terms of the proposed purchase during this period, the “obvious purpose” of which was to allow a contract to be made.

The Court rejected Global’s argument that the key commercial terms of its offer had already been accepted before Mr Maud’s 9 May email and that this email merely sought “confirmation” of acceptance for good order. The Court also rejected the argument that the additional terms in the 9 May Letter were just the “mechanics” of how to progress to completion and that any requirement for Aabar to agree to such terms did not affect the existing binding agreement to the key commercial terms.


This judgment highlights the holistic way in which a court will consider the formation of a contract, taking into account negotiations before and after an alleged contract notwithstanding whether such negotiations are conducted in writing, orally, by conduct or by any combination thereof. If a subsequent communication appears to be inconsistent with the contractual intentions, or indeed presumably if it appears to be consistent, this will be persuasive in determining whether a contract has been formed. Moreover, although the meaning of words in a contract cannot usually be interpreted by reference to later events, such later events can be referenced for the purpose of determining whether an alleged contract had initially been established.

The Court has also reiterated the power of “subject to contract” wording to refute contractual intentions; it is difficult for a party to argue that acceptance of a “subject to contract” offer could amount to the formation of a contract without clear agreement from both parties that this is what was intended. Further, the judgment indicates that the wording used in any offer letter or alleged contractual communication will be carefully considered by a court and that, for example, terms providing deadlines for acceptance of an offer or exclusivity periods in which negotiations with third parties are prohibited could be fatal to the argument that a contract has already been formed.

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.

© Allen & Overy LLP | Attorney Advertising

Written by:

Allen & Overy LLP

Allen & Overy LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.