The High Court of England and Wales has handed down an important judgement in the context of a distribution agreement. The court held that where a written agreement was never formally signed emails communicated between the respective parties together with the parties ‘course of dealing’ could constitute an agreement where the facts were sufficiently clear. The court went further to imply certain terms that were absent from the emails including a term obliging a party to give “reasonable notice of termination” and notably the court set this reasonable period of notice of termination at 9 months despite the arrangement lasting only 2½ years.
The Honourable Mr Justice Royce delivered his judgement in the case Jackson Distribution Limited v Tum Yeto Inc (2009) EWHC 982 (QB) on 12 May 2009. In this case the claimant Jackson Distribution Limited (‘JDL’) and the defendant Tum Yeto Inc. (‘TY’) had informally met at a trade show, later exchanged emails and then commenced dealing with each other and during the term of such dealing exchanged written draft agreements which were never signed.
Two and a half years into the arrangement, TY purported to terminate the arrangement giving JDL six months written notice. The court decided that the original emails exchanged by the parties together with the parties ‘course of dealing’ formed an enforceable agreement whereby JDL would act as a sole distributor for TY in the United Kingdom and Ireland. Notably, the court ignored the unsigned draft agreements that had been exchanged by the parties despite the argument by JDL that the parties had acted within the terms set out in one of those drafts.
Having found that the emails constituted an enforceable agreement the court then implied that, in the absence of any agreed terms as to the duration of the arrangement or the party’s rights to terminate, the agreement could be terminated with reasonable notice by either party and the court set this reasonable period of notice of termination at 9 months despite the arrangement lasting only 2½ years.
In deciding what ‘reasonable notice’ was the court focused on the findings that (a) there had been a 2½ year relationship between the parties; (b) large sums of money and time were invested by JDL in promotional shows, employees, vehicles, a warehouse and business premises on foot of the arrangement; (c) the significant percentage of JDL’s turnover made up by the distribution arrangement and (d) JDL’s voluntary agreement (despite there being no clause covering the point) not to sell for a period of time any products in direct competition with TY’s products.