High Court provides guidance on termination rights.
31st October 2016 by Rob Kelly
In C&S Associates UK Ltd v Enterprise Insurance Company plc  EWHC 3757 the court gave guidance on the variation of contracts by email correspondence.
The claimant (“C”) handled motor insurance claims for its customer, Enterprise Insurance Company plc (“E”). E wanted to carry out an audit exercise but C refused to deliver files to E’s external auditor. E claimed this was a serious breach of the contract with C and terminated the contract in reliance on that breach. Later, E also relied on cited C’s alleged poor performance as a new and different reason to justify termination. C sought damages for wrongful termination of the contract.
The contractual variation clause between C and E required that an effective variation should be in writing and signed by or on behalf of the parties. The court had to decide whether, despite the terms of the variation clause, there had been an effective variation of the contract by emails between C and E.
The court held that the contractual clause was intended to ensure that the parties would not be bound by oral communications or informal written documents that are not signed but went on to hold that a variation of C’s fees by (an unsigned) email was valid because the variation clause did not specify paper documents or a manuscript signature, nor that both parties’ signatures were needed on the same document. As the emails had been signed by appropriate individuals through their respective signature blocks in the emails, that was good enough.
Comment: Many contracts contain a clause which sets out how the contract may be varied. The clauses often require that only written amendments signed by all the parties are effective. This case means that such a clause will not be enough to prevent a variation by email. If the parties do not want variations by email to be possible, care should be taken expressly to state this in the contract.
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