Golden Ocean Group Limited –v- Salagacar Mining Industries PVT Limited and anor [2011] EWHC 56 (Commercial Court)

A recent judgment of the English High Court recognises that a chain of e-mail correspondence can, in certain circumstances, give rise to a binding guarantee in accordance with the provisions of the Statute of Frauds.

Facts

Golden Ocean Group Limited (Golden Ocean) initiated a claim for damages under a "guarantee" from Salagacar Mining Industries PVT Limited (SMI) in respect of an agreement between SMI's subsidiary, Trustworth Pts Limited (Trustworth) and Golden Ocean to charter a vessel owned by Golden Ocean.

During January and February 2008, Golden Ocean and Trustworth negotiated, by e-mail, various terms of a charter agreement which included reference to Trustworth, as charterer, being "fully guaranteed by SMI", it's parent company. In September 2009, Golden Ocean declared that, as agreed, the vessel would be delivered in mid November 2009. In December 2009, Trustworth and SMI denied the existence of a charter and a guarantee and refused to take delivery of the vessel.

In resisting Golden Ocean's claim for damages under the "guarantee", the defendents Trustworth and SMI contended that there was no guarantee or charterparty because (a) there was no fully completed and signed guarantee as is required under section 4 of the Statute of Frauds 1677 (which states that in order for a guarantee to be valid, it must be an agreement, memorandum or note in writing and signed) and (b) because one of the last e-mails in the chain of correspondence referred to the guarantee agreement being recorded in a future document by way of a "recap".

Decision

The English High Court ruled in favour of Golden Ocean. It held that it had an arguable claim that the charter and guarantee were valid contracts and that the guarantee did not fall foul of the provisions of the Statute of Frauds. The court reasoned that the agreement upon which Golden Ocean based its claim "was an agreement in writing" and that the e-mails which constituted the contract were "signed" by the electronically printed signature of the person who sent them.

The court also dismissed the argument relating to a recap as the recap was "a recapitulation of an agreement that had (arguably) already been made – in writing."

Similarily, the argument that the court is to look only at a "confined number" of documents was rejected. The court said that it is entitled to look at all of the documents regardless of their number and that it was not necessary for the guarantee to be in a separate document.

Finally, the court said that it made "commercial good sense" to give effect to agreements made in a series of e-mail communications which followed the usual sequence of events in the making of a contract i.e. offer, counter offer and acceptance.

Comment

This case is likely to be of persuasive authority in Ireland. It is a reminder about the need for caution by parties to a transaction in relation to the negotiation of terms by e-mail. Protracted e-mail correspondence between parties in relation to a guarantee of obligations may be deemed binding without the need for a separate document. While the "subject to contract" umbrella may provide a degree of protection, other recent case law establishes that this is not a bullet proof formula and parties should exercise caution in negotiations to ensure that they do not find themselves unwittingly bound by their correspondence and conduct.