COVID-19 – No Binding Contract for Supply of Millions of Surgical Face Masks
As demand for personal protective equipment exploded at the start of the COVID-19 pandemic, the business community leapt to the pumps. However, in the context of knife-edge negotiations for the supply of millions of surgical face masks, the High Court has ruled that no binding contract was ever reached.
As the pandemic took hold, a medical supplies company – the prospective purchaser – advised a government representative that it could supply the Department of Health and Social Care with 110 million face masks at a total price of £61.6 million. Via an intermediary, it had already entered into negotiations with an importer and distributor – the prospective seller – with a view to obtaining supplies from China.
A number of emails were exchanged before the Cabinet Office pulled the plug on the deal on the basis that masks from other suppliers were on offer at lower prices. The prospective seller subsequently launched a claim for almost $11 million in damages against the prospective purchaser on the basis that a binding contract had by then been completed and that the latter had reneged on the transaction.
Dismissing the claim, the Court found that the intermediary was authorised by both the prospective seller and purchaser to conduct all stages of the negotiations. He was authorised to receive and communicate information on their behalf. However, what he was not authorised to do was to conclude a binding contract on behalf of either of them without first obtaining their express agreement.
Viewed against the commercial context of the negotiations, the Court found that the contents of the emails exchanged could not, in any event, reasonably be interpreted as constituting either the making of a formal offer or the acceptance of such an offer. In the absence of a final and unqualified expression of assent to the terms of an offer, there could be no contract.