The recent case of Reveille Independent LLC v Anotech International (UK) Ltd [2015] EWHC 726 (Comm) does not relate to a construction contract but is interesting nevertheless as it deals with whether a contract can come into force by conduct, even if it states that it needs to be signed by both parties to be binding.

The document in question was a “Deal Memo” which stated in the signature box, that “This Merchandising Deal Memo shall not be binding on Reveille until executed by both the Licensee and Reveille”.

The Licensee, Anotech, hand amended and signed the Deal Memo and returned it to Reveille, but Reveille never signed it.

Anotech subsequently claimed the hand amended Deal Memo was not a binding agreement as:

  1. Reveille had not signed it; and
  2. The Deal Memo stated that it would not be binding until signed by both parties.

The Court decided that the Deal Memo was binding; it had been clearly and unequivocally accepted by both parties. The basis of the Judgment was that:

  1. Anotech acted as if it was bound by the Deal Memo as detailed below.
  2. Anotech received the benefits under the Deal Memo and Reveille carried out its obligations. In those circumstances Anotech could not seek to argue it was not binding.
  3. Anotech actively facilitated Reveille’s performance of its obligations.
  4. There was clear acceptance of the Deal Memo by Reveille’s conduct.
  5. At no point during Reveille’s performance of the Deal Memo did Anotech suggest that no contract existed between the parties.
  6. By not signing the Deal Memo, Reveille waived the prescribed method of acceptance. This is effective as long as Anotech were not prejudiced (which they were not).

Your acceptance by Conduct

Ensure agreements are signed by both parties to avoid the uncertainty of arguments of acceptance by conduct.

Alternatively, if you don’t want to be bound by contract, make it clear to the other party that your actions are not in acceptance of the contract before you take any action that may be seen as being operation of the contract.