This article was originally published on Motor Finance in February 2016. Greg Standing is a partner in Gowling WLG's motor finance team.
Agreements to agree are generally unenforceable as too uncertain. However, the Court of Appeal has recently found that a binding contract had been concluded for the sale of a limited edition Porsche even though there was no set price, no vehicle and no delivery date at the time the contract was made.
The claimant sought to acquire a limited edition Porsche (the vehicle) through the defendant. He paid an 'expression of interest' deposit and signed a Vehicle Order Form (VOF) which stated that he agreed to purchase the vehicle subject to the terms and conditions attached.
The contract was contingent on the manufacturer allocating the defendant a vehicle. The terms and conditions provided that the defendant was not obliged to fulfil orders in the sequence they were placed. No price, specification or date for delivery was specified in the VOF. After signing the agreement, the defendant sent the claimant an email (the confirmation email) confirming that he would receive the first of any vehicles allocated to it.
The defendant was allocated only one vehicle and sold it to another customer. The claimant claimed damages for breach of contract.
At first instance the court held there was no contract, merely an agreement to agree which was unenforceable.
The Court of Appeal disagreed. The parties had clearly intended to enter into a contract. The terms and conditions of the standard form VOF had all the hallmarks of what was expected in an agreement to sell a vehicle. There was no uncertainty as under the Sale of Goods Act 1979 (SGA):
- S5 provides for the sale of future goods, including goods to be acquired by the seller after the contract is entered into and where the seller's acquisition depends on a contingency which may or may not happen. The fact there was no vehicle at the time of the contract, or there may be no allocation, was not fatal.
- S8 provides that the price of goods need not be fixed by the contract but may be left to be fixed in a manner agreed by it. The terms and conditions clearly covered how the price was to be determined.
- S29 provides where no time for delivery is fixed, goods have to be delivered within a reasonable time.
The court also found the confirmation email was evidence of a collateral contract and a clear expression of what the parties had agreed at the time the contract was entered into. It varied the provision in the contract that the defendant was not obliged to fulfil orders in the sequence placed.
Under s51 SGA, the measure of damages for breach of contract is the difference between the contract price and the market or current price at the time of delivery or refusal to deliver. However, the vehicle had no market price, it being so specialised, so the court looked to the cost of the nearest equivalent vehicle. It awarded the claimant £35,000.
Dealers need to be aware of enthusiastic salesmen giving assurances to customers which bind them to a contract they would not otherwise be obliged to fulfil. Without the collateral contract in this case, the defendant would have had no obligation to supply.