i) Whether there was an understanding, express (e.g. 'subject to contract' – not the case here) or implied, that there was no binding agreement until documents were complete, or some other condition precedent to being bound such as the effecting of a letter of credit – 'condition precedent cases', and – but often overlapping
ii) Whether there was objectively agreement as to the essential/cardinal terms or sufficient terms as allow it to be concluded objectively that there was a complete and binding contract even if negotiations continued as to lesser terms, or documents had to be signed or agreed – 'consensus ad idem' cases.
i) Seller – to be one of two associated companies – Mr Caplin submits that this uncertainty was material, but I am not persuaded –and in any event there was clarification between the broker and the Defendant by WhatsApp on 9 March:
ii) Buyer :
iii) Quantity of Ukrainian corn - 50,000 MT:
iv) Either in one or two shipments/'bottoms':
vi) Price: US$ 205.20 FOB Odessa
vii) CAD 48 hours via Singapore bank:
viii) Delivery period: 5/20 April:
These were arrived at in a series of communications, not always setting out each time all the terms agreed, but in appropriate cases by using the words "rest as per below".
i) GAFTA terms including the arbitration clause:
ii) Loading instructions and fumigation procedures:
iii) Detail of demurrage charges in the event of a time charter:
iv) No extension to the delivery period:
v) In case there was delivery in two bottoms, providing for a spread between the Notices of Readiness ('NOR spread') – this was the later condition.
These proposals and draft amendments were described variously as "fine tuning" (by the Defendant) and minor (by the broker).
i) The words used by the Defendant and the broker on 9 March – "firm offer"/"firm counter-offer "/"Pls book it" "Ok book it" "Booked on 205.20" – "Super") - are suggestive of a concluded agreement:
ii) It is apparent that there was "speed of the market" (as in Proton Energy at ), in that the Defendant and the broker gave each other variously 15 minutes and 5 minutes to respond. Mr Heston agreed that at any rate the price would have been agreed and fixed because of the volatility of the market.
iii) In my judgment, by reference to the terms which were agreed, set out in paragraph 11 above, objectively there was sufficient agreement of the essential/cardinal terms, even if, there were, as Mr Hornyold-Strickland put it, "ancillary" terms left to be considered later, such as those in paragraph 12, and even though the Claimant explained the importance to it of the NOR Spread (originally described by the broker as a minor amendment).
i) The broker sent to the Defendant the draft conditions in the form approved by the Claimant at 11:19 on 9 March. There then begins what Mr Hornyold-Strickland called the ping-pong.
ii) The Defendant sent them back amended at 16.05, with a number of changes in red. Not all were accepted by the Claimant, and on 13 March the Claimant sent back to the broker, who sent on to the Defendant, a copy of the conditions, setting out which of the proposed changes were acceptable and which were not, with the additional term as to NOR Spread.
iii) Two of the unagreed amendments were not accepted.
iv) After further email negotiations there was a sticking point on the NOR Spread.
v) On 14 March a draft was sent by the Defendant to the broker, omitting the NOR Spread, signed by the Defendant. This was not accepted, and various compromises were suggested. Eventually the Claimant gave an ultimatum of a date which could not be complied with and pulled out.
"Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement brackets whether or not in writing) shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement".
To take the benefit of this of course he must show that the arbitration agreement was the subject of consensus even if the underlying agreement was not, or he must show that it was incorporated into the underlying agreement by a variation; and he must establish therefore that the clause was agreed by virtue of its being included in the draft conditions and not rejected by the parties when other conditions were rejected.
i) In that case the agreement said not to be binding did incorporate a FOSFA arbitration clause:
ii) He made it quite clear that his obiter provisional conclusion was directed to a case where an arbitration clause was contained in a contract said to be subject to a condition precedent and that "it is perhaps to be underlined that the question here went not to the existence of any consensus ad idem but instead to the nature of Kuok's obligation." (I shall refer to this as his 'caveat').
"47. It is not arguable that the arbitration clause contained within the original offer was nevertheless accepted by the counter-offer. The submission advanced by EFKO [and by the Defendant before me] was that, in sorting out the details of the contract, the parties agreed FOSFA arbitration even if the terms of the main contract were never concluded. But this is a contradiction in terms. There was no contract the details of which needed to be sorted out.
48. Reliance on UR Power…. does not advance matters (even assuming Gross J's "provisional inclination" is to be accepted). The issue in that case was whether the provision as regards a letter of credit was a contingent condition against a background of agreement of all other terms, including an arbitration clause. Here there was no mention of, let alone assent to, the FOSFA arbitration clause prior to the provision of the sale contracts. They in turn needed to be accepted or rejected as a whole or in the further alternative made the basis of a counter-offer."
i) Mr Hornyold-Strickland's reference to "rest as per below "(paragraph 11), relevant to consecutive emails adding terms which are then themselves agreed in addition to the previous ones, is of no support in relation to a case of supply of draft conditions in total which are then either accepted or not in total, and not by way of 'building blocks'.
ii) His 'building block' case of supplementation of an agreement is not supported by any standard application of offer and acceptance, as David Steel J makes clear. He had to depend upon Lord Hoffmann in order to suggest that an arbitration clause is "sui generis". He submitted that an arbitration agreement is unlike any other contractual clause, and the fact that there are other terms still in issue does not determine whether the arbitration agreement is separable: he accepted and asserted that such argument would not apply to a jurisdiction clause or a choice of law clause, because of his case that arbitration clauses require special treatment. But Lord Hoffmann's obiter advice as to an approach to construction cannot support this edifice.
"With regard to the application of the arbitration clause, the same considerations apply....If I am right in the view I take in the events which have happened there is no binding contract, the arbitration clause is not binding, and there is no contract out of which or in reference to which any dispute can arise."
First Mr Heston in cross-examination
"Q: Have you ever concluded a contract for the sale of Ukrainian corn from Odessa on terms which didn't include a GAFTA arbitration clause or GAFTA 49?
Q. So every time you've concluded a contract it's included GAFTA arbitration… A. Of course
… J: can I understand that? When you say "of course", any contract that you have entered into in the past for Ukrainian corn has always included a GAFTA arbitration clause?
A. When we sign up for contracts, we include the GAFTA clause."
Mr Heston was not of course accepting that there was a contract between the Claimant and Defendant including the GAFTA arbitration clause, but only that if a contract had been agreed, or when it was agreed, it would "of course "have included the GAFTA clause.
Mr Gurov in re-examination
"Q. Have you ever concluded a Ukrainian corn deal that did not include a GAFTA 49 arbitration clause?
A. No. I have never concluded any... Ukrainian corn trade deal, on F.O.B. basis, without incorporation of GAFTA...
J. How many have you done?
A. Hundreds, and I never calculated this amount of course. but it's not only my experience but experience of the whole market. I have never heard about any single trade on the Ukrainian F.O.B....corn market, based not on the GAFTA 49. That is the practice of the market.… It's always the case. Everybody knows this."
i) I am not persuaded that a term that there be "provision for GAFTA arbitration" is sufficiently certain. The arbitration clause in the draft conditions here was not as per GAFTA 49.
ii) I am not persuaded that, particularly in the absence of prior dealing, an arbitration agreement can be implied without any reference "in an agreement to a written form of arbitration clause or to a document containing an arbitration clause" as required by s 6 (2) of the 1996 Act. Implication of such a term is doubted in Russell on Arbitration (24th ed) at 2–061–3 and speculated as a possibility in Merkin and Flannery on the Arbitration Act 1996 (6th ed) at 6.2.3.
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