Contracts can sometimes be implied by the courts

Katie Froud reports on a recent High Court decision that demonstrates how contracts can sometimes be implied by the courts on the basis of performance, in the absence of an enforceable written contract.

The case in question involved TTMI Sarl, a company that charters tankers as part of the Sempra Group, whose parent company is Sempra Energy.

TTMI made arrangements with energy company Statoil ASA to charter a vessel, but no contract was signed between them. Instead, the chartering arrangements were made by an exchange of emails in which TTMI’s parent company, Sempra Energy, was mistakenly named as a contracting party.

A claim was later brought by TTMI as result of the arrangement and the matter was referred to arbitration. The arbitrator struck out the claim on the basis that there was no contract between TTMI and Statoil because of the mistake in the emails.

Appealing the decision, TTMI argued that a binding contract had been formed by the performance of the parties’ obligations – these being the voyage itself and the payment of the freight.

The court decided that a contract had indeed been formed between TTMI and Statoil, evidenced by the conduct of the parties rather than the exchange of emails. The arbitrator’s decision was therefore set aside.

Although this case involves a shipping dispute, the principle applies to all businesses and is therefore something to bear in mind.

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