Maple Leaf Macro Volatility Master Fund v Rouvroy

English Contract Law

Maple Leaf Macro Volatility Master Fund v Rouvroy
Image: ‘Still Life with Vodka and Herring’ by Roxana Paul

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When consideration is given by at least one party to a contract (whether interim or final) it becomes in principle, very hard for the other party to claim no contract could stand, irrespective of signatures or third-party withdrawal. In this case, the founder-directors of a beverage firm sought to rescind an agreement between themselves and a hedge fund provider, despite a long-standing commercial history, and openly agreed terms of engagement.

After enjoying moderate success as an alcoholic drinks manufacturer, and having recently acquired a smaller company as part of their expansion, it was decided that the time had come to recoup on their investment, and so a controlling share of their business was sold to a large financial holdings company. Within a year, the working relationship between the investors and owners deteriorated, to the degree that the appellants moved to buy back their company and regain controlling influence.

As part of this reversion, the terms of the arrangement required them to obtain significant loans within a very narrow timeframe, which themselves provided stakeholder rights to the lenders. During the construction of the funding package, the defendants took the step of paying the monies loaned directly to the controlling firm, as part of their commitment to the loan arrangement and repurchase scheme. When a third party to the draft contract renegotiated a different arrangement with the appellants, they declined to add their signature to the final agreement, leaving only the appellants’ and defendants’ ink upon the document.

It was then argued by the appellants that the absence of a third signature rendered the contract void, and so there now existed no binding obligation on their part to continue with the loan or invitation to share control. When stripped down and reassembled in its proper context, it was found by the Court of Appeal that due to the significant consideration given by the defendants, there was sufficient evidence to show an enforceable contract that bound both signatories, despite the reluctance of the third party.

Author: Neil Egan-Ronayne

Author, publisher and foodie...

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