Section 4 of the Statute of Frauds 1677 provides that for a guarantee to be enforceable it must be in writing and signed by the guarantor, or a person authorised by the guarantor. In Golden Ocean Group Limited v Salgaocar Mining Industries PVT Ltd1 the Court of Appeal considered the application of the 1677 Act in the context of a series of email communications between the parties.
Facts of the case
Golden Ocean Group Limited (‘Golden Ocean’) entered into negotiations to charter their vessel to Salgaocar Mining Industries (‘SMI’). Negotiations to charter the vessel for ten years took place through the chartering arm of SMI, Trustworth Pte Ltd (‘Trustworth’).
Negotiations took place predominately by email between the respective parties’ shipbrokers. It was indicated within the email communications that the negotiations had proceeded on the basis that the charterers were “Trustworth fully guaranteed by SMI”.
Following the conclusion of the main negotiations (‘the Final Email’), the parties continued to correspond sporadically, and versions of the contract for charter were prepared and circulated. The contract contained no reference to a guarantee by SMI, and no specific document of guarantee was ever prepared. Further, on the facts, these versions of the contract were not signed or authenticated by either SMI (as guarantor) or Trustworth (as charterer).
As the delivery date of the vessel drew near, Trustworth and SMI refused to take delivery, denying the existence of the charterparty and guarantee. Golden Ocean brought a claim under the guarantee on the basis that the charterer had failed to honour its obligations under the contract by refusing to take delivery.
SMI challenged the claim on the basis that Golden Ocean had no real prospect of success because of the statutory defence afforded to them (as guarantors) under the Statute of Frauds.
The Court of Appeal held that section 4 of the Statute of Frauds 1677, contained no express indication that the “agreement in writing” had to be in a single document, or even a limited number of documents. The Court saw no good reason for such a limitation to be applied, and as such saw no objection in principle to the requirement being satisfied by a sequence of negotiating emails or other documents.
Further, the Court held that a person signing off an email with an electronically printed signature, so as to indicate that it came with their authority and that they would take responsibility for its contents, was sufficient as a signature for the purposes of the Statute of Frauds. The signature at the end of the Final Email was regarded as authentication of the contract of guarantee contained within it and the sequence of emails that had lead up to it.
The guarantee was therefore held valid and enforceable.
The case provides another example of the courts taking into account modern commercial practices, interpreting the Statute in a way that accommodates the contemporary business practice of exchanging emails.
It provides an important reminder that email communication is not the informal method it is often perceived to be. In fact the case demonstrates that communication via email is capable of being just as binding as other forms of writing and signature. If a company does not wish to be bound in an email exchange whilst negotiating, it is important to make clear that you are negotiating subject to contract only and do not intend to be bound by the email communications.
For additional information please contact Justin Emerson of Gepp & Sons on 01245 228113 or email firstname.lastname@example.org
The above is not legal advice; it is intended to provide information of general interest about current legal issues.