1 June 2016
Reveille Independent LLC v Anotech International UK (Limited)  EWCA Civ 443
This case concerned a dispute over whether there was a binding contract between Anotech, a manufacturer of cookware, and Reveille, a television production company. The contract in question was for Reveille to integrate and promote Anotech’s products in its television programme MasterChef US, as well as to license Anotech to use the MasterChef brand on its products for sale.
During initial negotiations, Reveille sent a brief document referred to as the ‘Deal Memo’ to Anotech, which contained relevant terms of the agreement, and which was meant to subsequently be replaced by detailed, long form agreements to be negotiated by the parties. The Deal Memo set out the licensed articles, the license territory, and the schedule of payments to be made.
An Additional/Special Provisions section stated: "Non-refundable Advance is due upon signature of this Merchandising Deal Memo." The Deal Memo also stated that it would not be binding on Reveille until executed by both the Licensee and Reveille.
There were three further iterations of the Deal Memo, the last version being one that was amended, signed and returned to Reveille by Anotech. In this version, Anotech had included the handwritten words: “Approved no marketing advance”, and as a result of a mistake, excluded the Additional/Special Provisions section.
Reveille never signed the Deal Memo, and over the following months there were further negotiations regarding the long form agreements but they were never completed.
Subsequently, Reveille sent an invoice to Anotech for the advance sum, and Anotech responded by requesting invoices for the ‘first payments’ to be appropriately addressed. However these were not paid and Reveille subsequently wrote to Anotech treating the contract as repudiated.
The judge at first instance considered that the important factor in deciding whether or not the Deal Memo was a legally binding agreement, was Reveille’s conduct in relation to the alleged contract. The judge found it to be extremely clear that both elements of the supposed contract – the integration of Anotech’s products into the MasterChef programme and the license to use Reveille’s MasterChef brand – had been carried out by Reveille. The judge therefore concluded that Reveille had accepted by conduct Anotech's offer contained in the Deal Memo as returned by Anotech. Accordingly, he ordered Anotech to pay approximately USD1m, in respect of integration fees and royalties, plus interest and costs.
Anotech’s argument in the appeal was that the actions taken by Reveille did not necessarily represent acceptance of the Deal Memo, and could be deemed as acts taken in anticipation of the long form agreements being reached.
In the judgment of the appeal court, Cranston J stated a number of legal principles drawn from case law and authoritative commentary that he considered to be relevant to this case:
The court also highlighted important policy considerations that featured in the case law:
In light of this, the court of appeal dismissed Anotech’s appeal unanimously, finding that:
This case serves as a clear reminder that a prescribed mode of contract acceptance can be waived by conduct. It also demonstrates that just because a document is short, in the form of a ‘memo’, unsigned, and contains handwritten notes, does not prevent it from being a legally binding contract with significant cost implications.
It is therefore important that when negotiating a contract, the client is satisfied with the position reached on its terms, preferably recorded in a formal and unequivocal document, before proceeding with any conduct related to the content of the proposed contract. It could otherwise find itself legally bound by what it had perceived to be an incomplete and unsatisfactory document.
When considering if a contract has come into existence between commercial parties in negotiation, the court has shown that it is keen to preserve certainty and give due attention to what it considers to be the reasonable expectations of honest, sensible business people.
This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published.
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