When negotiating a contract, it is essential to ensure that a final, binding agreement is reached between the parties. The recent case of Rosalina Investments v New Balance Athletic Shoes has highlighted the importance of reaching a proper conclusion to ongoing negotiations and ensuring that a signed contract is in place.
Background
In this case, the claimants, Rosalina Investments, held the rights to exploit the promotional activities undertaken by a member of the Manchester United football team. Under an agreement dated March 2013, they granted New Balance the rights to use the footballer’s image. The agreement came to an end in July 2016, but the footballer continued to promote the products whilst the parties entered into negotiations for a new contract.
In January 2017, New Balance wrote to Rosalina Investments notifying them of its decision not to approve an extension of the contract. New Balance offered to pay an amount based on the terms of the proposed new contract in recognition of the services provided up until January 2017.
Rosalina Investments asserted that a valid contract had been in place and issued proceedings, claiming over £2 million in lost retainer and damages.
Decision
The High Court held that it was clear from the communications between the parties that they had only intended to be bound following signature by all parties. The court found for the defendants and struck out the claim.
Comment
This case has demonstrated the importance of concluding contractual terms with certainty. The most reliable way of doing this is to ensure that a written contract is drawn up and signed by all parties. Equally, when negotiating a contract, the parties should make it clear that they do not intend to be bound by such discussions until the final contract has been signed.