Lord Ordinary finds customer of glass supplier in breach of agreed exclusivity contract
A double glazing manufacturer has succeeded in establishing that it had a binding contract with one of its customers under which they agreed to buy glass exclusively from it from 2016 to 2020.
About this case:
- Citation: CSOH 49
- Court:Court of Session Outer House
- Judge:Lord Braid
Supaseal Glass Ltd contended that Inverclyde Windows Manufacturing Ltd was in breach of contract for buying glass from other suppliers. The defender denied that a binding contract in the terms specified by the pursuer had been concluded.
The action was heard by Lord Braid in the Outer House of the Court of Session. Thomson QC appeared for the pursuer and Manson, advocate, for the defender.
Prior to December 2015, the defender had regularly purchased glass from the pursuer at what were described as “mates’ rates”. Eighty-six per cent of shares in the defender were held by company director Mark Gorman, with a minority shareholding of 14 per cent held by Alexander Gray, who was the managing director of Supaseal. By November 2015 relations between the two men had degraded to the extent that they agreed that one should buy out the other’s interest in Inverclyde.
It was averred by the pursuer that, at a meeting on 8 December 2015, it was agreed that Mr Gray would transfer his shares to Mr Gorman for the sum of £57,000, and that the defender would buy all glass it required from the pursuer at a stipulated rate until 31 December 2020. The defender’s position was that, while a discussion had taken place about future glass purchases and prices had been agreed for three products most commonly purchased from Supaseal by the defender, no agreement on this point had been reached.
Evidence was given by Mr Gray that an oral agreement between himself and Mr Gorman had been reached at the meeting. In his witness statement he gave a verbatim account of how the conversation with Mr Gorman had unfolded, which was disputed by the defender. In his rebuttal statement, Mr Gorman said that, while he had accepted that he could no longer pay the previous rates for Supaseal products, following the meeting he had phoned his solicitor to say he was dissatisfied with the exclusivity deal and did not agree to it.
Counsel for the defender submitted that the evidence of Mr Gray ought to be found incredible as he sought to give evidence about the precise words used at various points of the 2015 meeting. In an email following the meeting the reference to “signing up” to buy all glass from the pursuer was not in plain language a binding agreement in itself.
Essentials of agreement
In his decision, Lord Braid said of the credibility of Mr Gorman’s evidence: “There are two major obstacles to my accepting his evidence as credible and reliable. The first is why, if his account of what was said at the meeting is correct, did he send an email to Ms Rayner [his solicitor] on the day of the meeting stating in terms that he had agreed to sign up to purchase all glass until the end of 2020? The second is that if he had telephoned Ms Rayner immediately after sending the email to say that he had not after all agreed what was in the email, that would have been something so unusual that she would surely have remembered it.”
He continued: “Mr Gray, on the other hand, while he was not slow to use any opportunity he could to denigrate Mr Gorman, and was often more anxious to make his point than to answer the question put to him, sometimes in a bombastic manner, nonetheless gave a clear and consistent account of what happened at the meeting, which in many material respects was supported either by the contemporaneous documentation or indeed by aspects of Mr Gorman’s evidence where the two were not inconsistent.”
Addressing whether a binding agreement had been reached on exclusivity, Lord Braid said: “Insofar as the share purchase and the exclusivity agreement were concerned, there was simply no mention of a written agreement at all. The clearest indication that Mr Gray and Mr Gorman regarded themselves as immediately bound by the agreements reached is that Mr Gorman began making payments before the share purchase agreement had been signed.”
He continued: “In the context of emails written by businessmen, the term [‘sign up’] simply indicated that the parties had reached an agreement, rather than that they literally had to sign a written agreement before they considered themselves to be bound: in everyday language, ‘signing up’ to something signifies a willingness to be bound without any necessary connotation that a written agreement will be required.”
Lord Braid concluded: “The submission for the defender is that the parties merely reached a general measure of agreement on the heads of terms of a proposed contract which they both intended to be sent to a lawyer for the purpose of initiating the process of preparing a binding and enforceable agreement by way of a written deed. I have already held that the evidence showed no such thing. The terms of the oral agreement reached between the parties was that Inverclyde would purchase all of its glass from Supaseal for a period of 5 years, at the prices agreed between Mr Gray and Mr Gorman. Those comprise the essentials to the agreement.”
It was therefore concluded that a binding contract existed between the parties, with the case put out by order for further procedure.