In Rosalina Investments Ltd and another -v- New Balance Athletic Shoes (UK) Ltd  EWHC 1014 (QB) – a dispute about the very existence of a contract – the High Court found in favour of New Balance, a sports manufacturer, by striking out claims brought by two separate companies which held rights to the image of Marouane Felliani, a Belgian footballer.
Pursuant to a written agreement dating back to 2013, Rosalina Investments Ltd and Rosalina Investments UK Ltd held the rights to the promotional and commercial activities/services of Marouane Fellaini, which included him wearing their football boots. This agreement expired in July 2016.
In the subsequent six months, the parties exchanged various emails and several draft agreements in view to obtaining an extension or renewal to the previous agreement. During this time, Fellaini continued to wear and promote New Balance products. Critically no new agreement was signed between the parties.
The relationship between Rosalina and New Balance came to an end in January 2017. New Balance decided against extending the 2013 agreement, paying a final sum in recognition of services provided by the claimants between July 2016 and January 2017.
Rosalina argued that a new contract had come into existence in September 2016, when a draft contract had been prepared and the parties had discussed arrangements for its execution by email. Thereafter, the parties acted as if a contract was in place; New Balance provided boots to Fellaini and prepared a catalogue using his image.
Rosalina alleged that New Balance had breached the said contract by breaking off negotiations. In the alternative they alleged that New Balance breached an obligation to negotiate in good faith. Rosalina claimed over £2 million in lost retainer monies and damages.
Opposing the claim, New Balance contended that inter partes correspondence failed to demonstrate that an agreement had been concluded between the parties. The draft contract was subsequently amended and both parties stressed the need for its signature. This demonstrated the parties’ intentions to be contractually bound only after signature had been provided by all. New Balance applied to strike out the claim and for summary judgment to be entered in its favour.
Boldly, the court held that the issues were suitable for summary determination and that the claim had no reasonable prospects of success. The court made an order to strike out the claim and for summary judgment in New Balance’s favour.
May J held:
- that only signatures belonging to all parties could evidence conclusion of the parties’ negotiations and their intention to be bound by a final agreement
- as the parties had failed to provide their signatures, there was no binding agreement
- that there was no obligation on New Balance to negotiate in good faith
- that New Balance had not breached any such obligation in any event, for reliance upon an open-ended duty to negotiate in good faith was void for uncertainty
It was noted that whilst the parties’ actions provided ‘powerful evidence’ of intention for there to be a contract, the actions continued equally before the date when the claimants contended there was no contract, as well as after. There were also repeated references in the correspondence to the need for the document to be signed. References in negotiations to ‘amendments/changes’ were, to the court, ‘highly suggestive of a contract that is not yet over the finishing line’.
Points to note
The decision is important for it reminds commercial entities that the courts will consider all communications and activities to assess parties’ intentions when entering into an agreement. Further, an obligation to negotiate in good faith must be carefully drafted in order to be effective. Finally, the court is likely to infer that parties are not bound unless and until all have signed an agreement, particularly where parties have the benefit of legal advice.