JIREHOUSE CAPITAL V BELLER

[2009] EWHC 2538 (Ch), High Court, Chancery Division, Mr Justice Peter Smith, 20 October 2009

Contract - Settlement negotiations subject to contract - Whether settlement binding in the circumstances - Necessary implication that subject to contract qualification had been lifted

The parties had been negotiating "subject to contract" shortly before the hearing date and arrived at a settlement agreement. A dispute arose as to whether that settlement was binding. Peter Smith J held that a "subject to contract" qualification introduced by the parties into negotiations could only be lifted expressly or by necessary implication. There had been no express lifting of the qualification, but there were four reasons why there was a necessary implication that the words subject to contract no longer applied and the settlement was concluded: (i) counsel for one of the parties was not alive to any "subject to contract" restriction in the dispute in which he was retained; (ii) both he and the other counsel were anxious to achieve finality and both of them believed they did so; (iii) the parties afterwards acted as if they had achieved settlement; (iv) when parties shortly before the trial instruct their lawyers to conclude a settlement it can only be on the basis that if there is an agreement it is a necessary implication of that agreement that any previous subject to contract umbrella had been lifted. Emails sent immediately following the agreement containing the words "subject to contract" were mere automatic repetition of a phrase which had appeared in earlier emails.