Contract may be made in more than one country for purposes of establishing jurisdiction

The English High Court has held that a claimant had a good arguable case that a contract was made in both England and Texas and that this was sufficient to come within the relevant gateway for seeking permission to serve out of the jurisdiction, namely that the contract was made within the jurisdiction: Conductive Inkjet Technology Ltd v Uni-Pixel Displays Inc [2013] EWHC 2968.

Here the contract had been signed on behalf of the claimant in England and posted to the defendant in the USA, who signed and returned it to the claimant. The court declined to apply the traditional “posting” rule that an offer is accepted (and therefore the contract is formed) where the letter of acceptance is posted.

The irony in this case is that the defendant had refused to accept an English law and jurisdiction clause put forward by the claimant, saying the only alternative to Texas that it would accept was to omit any choice of law or jurisdiction clause.

Background

The claimant, an English company, alleged breaches of the Patents Act and misuse of confidential information by the defendant, a Texan company, including claims that a Non-Disclosure Agreement entered into in 2005 had been breached. One of the gateways relied upon by the claimant to permit service outside of the jurisdiction in respect of the NDA claim was that the contract was made within the jurisdiction, which is also a basis for an application for leave to serve Hong Kong proceedings outside the SAR.

Contemporary documents in evidence showed that the defendant had sent the final version of the contract to the claimant for approval attached to an email. The claimant replied that the contract was fine and that they would print out three originals and sign them and then send them to the defendant by Federal Express. The defendant agreed and said they would execute the documents on receipt and return two signed copies. Accordingly, it appeared that the agreement was signed on behalf of the claimant in England and by the defendant in the USA.

The agreement did not contain any choice of law or jurisdiction clause, the defendant having refused to accept an English law and jurisdiction clause put forward by the claimant.

Decision

The judge, Roth J, considered it would be wholly artificial to determine where the contract was made by applying the traditional “posting” rule, dependent upon which party happened to send the fully executed document. He pointed out that the principle underlying the jurisdictional gateway is to establish a sufficient connection to this jurisdiction and it would be arbitrary to do so on the basis of the order in which a document was signed.

In doing so, he adopted the reasoning of Mann J in Apple Corps v Apple Computer [2004] EWHC 768 (Ch). In that case Mann J referred to Lord Diplock’s observation in Gibson v Manchester CC [1979] 1 WLR 294 that there are certain, albeit exceptional, types of contract that do not fit easily into the normal analysis of a contract being constituted by offer and acceptance. Mann J then considered how that applied to the facts before him involving a commercial settlement agreement between an English and an American company, following extensive negotiation between their lawyers, that was finally agreed in a telephone conversation between London and California. He observed:

“Where completion takes place at a distance over the telephone, it might well be possible to construct an offer and acceptance analysis….but it might equally be thought that that analysis is extremely forced and introduces a highly random element. The offer and acceptance may well depend on who speaks first and who speaks second, which is likely to be largely a matter of chance in closing an agreement of this sort. It is arguably a much more satisfactory analysis to say that the contract was made in both places at the same time.”

Comment

Notwithstanding the reference to "exceptional" types of contract, the factual situations in both Apple Corps and the present case are commonplace. Every case will of course depend on its facts, but in many situations where only one party is in the jurisdiction when a contract is concluded, it seems that a good arguable case that the contract was made in the jurisdiction may be available on the basis of these cases, albeit they are both first instance decisions.