Can a contract really be made in two jurisdictions?

Case: Conductive Inkjet Technology Ltd (CIT) v Uni-Pixel Displays Inc [2013] EWHC 2968 (Ch)

Background

As a general rule regarding the time and place of a contract’s formation, the contract is made at the time and place where acceptance of the relevant offer is communicated to the offeror.  The postal rule will apply to delayed forms of communication with the effect that acceptances will be deemed to be effective at the time of sending, provided the offeree addresses and stamps the letter correctly (Adams v Lindsell (1818) 1 B & Ald 681).

In the earlier but similar case of Apple Corps Ltd v Apple Computer Inc [2004] EWHC 768 (Ch) it was for the court to decide in which jurisdiction the contract had been made in where the parties entering into the contract had been unable to agree on a governing law and jurisdiction clause such that they had purposely omitted the clauses from the final contract.  Mann J, who considered the case, held that it was possible, as a matter of principle, for a contract to be made in two places at once.  As the parties had concluded their contract over the telephone, Mann J found that there was a good arguable case for saying the contract was made in both England and California.  It is noted that the judge’s decision was held to be obiter, as he had already found there was a good arguable case that acceptance was received in the UK, for the purposes of the rule in Entores Ltd v Miles Far East Corporation [1955] EWCA Civ 3 which is the contract is made where acceptance is received.  This decision was later confirmed in Brinkibon Ltd v Stahag Stahl G.m.b.h [1983] 2 AC 34.

Facts

CIT are an English technology Company had entered into a non-disclosure agreement (NDA) with Uni-Pixel Displays (UPD) who were based in Texas, US.  CIT claimed that UPD had used its proprietary information in breach of various confidentiality obligations owed to them.  Such obligations included provisions within the NDA, which had been agreed by the parties through email exchange.  At the time of negotiations, the parties could not agree on a choice of law and jurisdiction clause and so had opted not to include one.  The English courts granted CIT permission to serve its claims on UPD out of jurisdiction and UPD applied to have the permission set aside based on the fact that English courts did not have jurisdiction in the matter.  CIT’s position on the NDA was that, applying the reasoning of Apple, it had a good arguable case that the NDA was made in both England and Texas so the test for English jurisdiction was made out.

Decision

The judge found in CIT’s favour having agreed that it did have a good arguable case that the NDA was made in both jurisdictions as per the decision in Apple as the parties had expressly agreed not to incorporate a choice of law and jurisdiction clause and it would be wholly artificial to determine the place of the contract by applying the traditional ‘posting’ rule, depending on which party happened to send the fully executed document.

The principle underlying the jurisdictional gateway is to establish a sufficient connection to English jurisdiction.

Comment

In deals such as evidenced here, where the only option to close a deal appears to be with the parties agreeing to omit a jurisdiction and/or governing law clause, a party in any subsequent litigation, may be able to persuade the English courts that, for the purposes of serving out, a contract was made both in the UK and in another jurisdiction.  However, it is unclear whether judges in preceding cases will adopt the obiter approach in Apple and as taken in this case.  Whilst it is probable that the Entores approach will be considered, it remains unpredictable as to outcome of the place of formation.