Summary: A company was bound by a variation of an agreement agreed through an email exchange, as this was found to be within the scope of a requirement that variations be in writing contained in the original agreement.
C&S Associates UK Ltd v Enterprise Insurance Company Plc  EWHC 3757 (Comm) (21 December 2015)
On 2 July 2012, C&S Associates UK Ltd (‘C&S’), a motor insurance claims handler, entered into an agreement (the ‘Agreement’) to provide a claims handling services to Enterprise Insurance Company Plc (‘Enterprise’), an insurance company. The Agreement could be terminated by either party at any time on three months’ notice. In 2013, C&S proposed to increase fees under the Agreement and to introduce a two year minimum term. On 3 October 2013, Mr Myles Ellis, Head of Claims UK at Enterprise, sent the following email with an automated signature at the bottom. ‘I am pleased to confirm that … we are happy to agree the fees outlined in my e-mail of the 23rd September with a 2 year agreement to take effect from 1st October 2013… We will in due course submit to you a revised Claims Administration Service Agreement to include the agreed terms.’ These terms were accepted by Mr Mike Smith, a director of C&S on 4 October 2013, who responded ‘Many thanks Myles, much appreciated. Mike’. From this point, C&S invoiced its fees at the higher rate and Enterprise paid them. However, no revised Agreement was ever produced. In January 2014, Enterprise terminated the agreement claiming repudiatory breach. C&S counterclaimed for wrongful termination. A preliminary issue was whether the Agreement had been varied by the emails between Mr Smith and Mr Ellis. Clause 24.1 of the Agreement stated ‘Any variation of this Agreement shall not be effective unless made in writing and signed by or on behalf of each of the Parties to this Agreement.’ Enterprise’s main arguments were that the email chain failed to satisfy the requirements of clause 24.1, and that Mr Ellis’ email of 4 October 2013 was an offer of agreement in principle, which was subject to a revised agreement being produced.
After analysing the language of the emails, Males J concluded that it ‘suggests strongly that agreement had been concluded’’ as the emails used the language of offer and acceptance and there was nothing which suggested that the emails should be subject to contract. Although the parties had used the phrase ‘in due course’ when referring to the revised Agreement, this did not prevent the immediate formation of the contract. Males J felt that while clause 24.1 ‘introduced a degree of formality to any variation’ it did not ‘go so far as to insist on manuscripts signatures, paper documents or that both parties’ signatures must be on the same document.’ He applied Golden Ocean Group Ltd v Salgaocar Mining Industries Pvt Ltd  EWCA Civ 265, which found that an electronic signature was sufficient for satisfying the requirements of the Statute of Frauds, to determine that electronic signatures on a sequence of emails were capable of satisfying the requirements of clause 24.1. Males J, therefore, held that the emails had operated as a valid variation of the contract.
Variation Clauses are commonplace in finance documents. Finance lawyers and their clients should consider carefully the level of formality they require in order to make valid variations to their agreement. They might wish to consider additional requirements such as manuscripts signatures or paper documents. Nevertheless, in some cases an oral “variation” might still be effective if it operates (i) as a waiver by the parties of compliance with the non-variation clause, or (ii) as a completely new contract which replaces the original contract (see the later Court of Appeal decision in Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd  EWCA Civ 396).