Litigation

UK LITIGATION REVIEW 2020 7 CONTRACT Many commercial disputes involve contractual obligations. The past 12 months or so have seen judgments on a range of contract issues, including the effect of email signatures, third party rights to enforce, oral contracts, rectification, severance and relational contracts and the implied duty of good faith. This last topic has perhaps been the most active issue in contract law over the past year. However, a clear and consistent approach to determining when a duty will be implied has not yet emerged. Email signatures Neocleous v Rees 2 concerned whether an automatically generated email signature—which included a person's name, occupation, role and contact details—was a 'signature' that was capable of evidencing a concluded contract. The potential contract was a settlement agreement involving a disposition of land (and therefore was required to be in writing under the Law of Property (Miscellaneous Provisions) Act 1989). It was constituted by emails exchanged between solicitors. The County Court held that there was no reason to distinguish between an email signature automatically set up on an electronic device and one that is manually entered—in both cases the recipient would know that the sender consciously decided to identify his name with the email. Looked at objectively, therefore, the presence of the name in the signature indicates the sender's clear intention to associate himself with the email—that is, to authenticate or sign it. There was thus a valid contract. Third-party rights to enforce Two recent cases have concerned who has rights and obligations under a contract. Chudley v Clydesdale Bank 3 concerned a letter of instruction (LOI) for the opening of an "ARCK LLP Segregated Client Account" in connection with an investment made by the appellants. The appellants were not party to or named in the LOI, or even aware of it at the time it was executed. The Court of Appeal confirmed that their lack of awareness of the LOI did not prevent the appellants from being able to enforce it as third parties under the Contract (Rights of Third Parties) Act 1999 ("CRTPA"). 2 [2019] EWHC 2462. 3 [2019] EWCA Civ 344. The Court held that the words "Segregated Client Account" were sufficient to entitle the appellants to enforce the LOI under the CRTPA. The words both expressly identified a class of which the appellants were members (clients of Arck) and purported to confer a benefit on a third party (the opening of an account that would hold clients' money separately). The Court clarified that the same words in a contract could satisfy both of those requirements. Taking matters one step further, the issue for the Court of Appeal in Filatona Trading v Navigator Equities, 4 was whether a contract that did not purport to confer a benefit on, or even refer in any way to, a third person could be enforced by that person as a disclosed principal. It is uncontroversial that a person who enters a contract as principal and whose interest in the contract is known to the counterparty (even if his identity is not) is a disclosed principal who can sue or be sued on the contract made on his behalf by an agent acting within the scope of his authority. In this case, Vladimir Chernukhin was Oleg Deripaska's joint venture partner. Mr Deripaska, Mr Chernukhin's girlfriend (Ms Danilina) and two companies entered, as named parties, a shareholders' agreement in connection with the joint venture. It was not in dispute (before the Court of Appeal) that Mr Chernukhin, although not mentioned anywhere in the document, was a party to the agreement as a disclosed principal, Ms Danilina having entered the agreement as his agent. Therefore, the issue (which had not previously been considered in the case law) was whether the terms of the agreement and/or the surrounding circumstances excluded Mr Chernukhin's right to enforce it. The Court of Appeal held that there is a heavy burden to show that the terms of a contract and/or surrounding circumstances exclude a disclosed principal from exercising rights under the contract. The Court concluded that there was nothing in the agreement (or surrounding circumstances) that did exclude Mr Chernukhin's right to sue under it. Both Chudley and Filatona are salutary reminders of the need to consider the potential relevance of third 4 [2020] EWCA Civ 109.

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