Are you certain about your contract terms?

8th February 2023

Academy trusts enter into a wide variety of commercial contracts. These may be catering contracts,  contracts for the provision of services such as IT support, or contracts in respect of school trips. For the terms of such a contract to be legally enforceable, there must be sufficient certainty in its terms.

If certain terms, such as pricing, are not sufficiently clear, there is a risk that the terms could be considered not to have been agreed and therefore there may not be a binding contract in place. This could have significant consequences on the academy trust, potentially leaving it out of pocket or unable to enforce the other party’s obligations.

In the case of Cooper v Dnata Catering Services Ltd [2022], the question of whether a binding and enforceable contract is created where the contract price has not been agreed, or where the price to be paid is a ‘reasonable sum’, has been considered, and has clarified that where terms are uncertain, there may not be a binding contract.

The case

Ms Cooper, the founder of an in-flight catering supply business, commenced proceedings against Dnata relating to a contract for the supplier of economy class snack boxes to an airline owned within the same group as Dnata. Having previously provided snack boxes to the airline, Dnata invited Ms Cooper to submit a formal proposal to provide a second tranche of snack boxes. As part of the proposal, the price was to be based on “achieving global leverage on components, packaging, assembly and logistic costs” and would also depend on the routes on which the snack boxes would be sold by the airline.

The proposal was accepted and snack boxes were supplied. The contract was alleged by Ms Cooper to terminate in 2017. However, the airline stopped purchasing the snack boxes before this date. Whilst the contract was evidenced in various emails, the price per snack box was not. The court was therefore asked to consider whether there was a contract in place, the terms of such a contract, and whether it had been unfairly terminated by Dnata.

The court found that, whilst there was evidence of discussions via email about the pricing principles of the snack boxes, there was no agreed formula, and the pricing principles were not quantified at the time the contract was alleged to have been entered into. A price which was eventually agreed in 2014 did not apply to the entire contract period. Accordingly, there was no contract in place, meaning that there was no minimum term and Dnata was entitled to stop purchasing the snack boxes.

Ensuring clear contract terms

It is sometimes the position that, particularly where there is an existing relationship between two parties, commercial deals are arranged on a more informal basis. However, the Cooper v Dnata Catering Services Ltd [2022] case highlights that whilst the courts can go some way towards providing meaning to a contract where there is a lack of clarity, they can only do so on the basis of the words used. It is therefore vital that provisions in a commercial contract are clearly drafted in order that their meaning can be ascertained by all parties and to ensure that a valid contract exists.

If your academy trust is considering entering into any commercial contract, we would be happy to provide legal advice to ensure that the obligations of the parties are clear and enforceable.

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