As can sometimes happen, the mediation by a solicitor can prove the undoing of bargaining between parties, when for one reason or another, the third party attempts to manipulate matters to the detriment of those he was initially employed to serve.
On this occasion, a shareholder sale agreement was drafted by two company co-directors; one of whom, had decided upon his retirement to relinquish his stake holding for a sum of around £347,000.
During the preliminary stages of the contract, numerous oral agreements were made with little to no conflict; however, as time progressed, the matter became complicated through the construction of a draft agreement, which had been worded by a second firm of solicitors.
At the point of litigation, communication had deteriorated to a quick succession of emails between the respondent and the solicitor alleged to be acting for both parties.
Within these exchanges were a number of comments and misinterpretations that ultimately derailed the negotiations; however, for the purposes of the clarification, the timeline was as follows:
(1) A draft agreement was made on behalf of both parties, subject to mutual consent to the document’s wording.
(2) The respondent’s solicitors suggested an amendment to the terms of the agreement.
(3) The suggestion was construed by the appellant as a rejection of the agreement.
(4) The mediating solicitor construed from a telephone conversation, that the respondent was refusing to sign the agreement without knowledge of the appellant’s future plans.
(5) The respondent expressed that he perceived the appellant to be contractually obliged to purchase the shares.
(6) The respondent denied he had any interest in the future of the company or the appellant.
(7) The mediating solicitor imposed a time restriction for acceptance of the draft agreement.
(8) The mediating solicitor withdrew his services upon expiration of the time restriction.
(9) The respondent later agreed to sign the agreement, despite his earlier reservations.
In the first hearing, the judge found that the discussions within the first and last email were tantamount to a binding contract; and so, awarded accordingly.
However, at the Court of Appeal a reexamination of the facts and chronology of events painted quite a different picture.
Here, it was held that while the contract itself was not subject to time penalties, the position adopted by the ‘mediating’ solicitor was one that implied how all terms of the bargain were now defined through his presence.
Therefore, by the imposition of a threshold upon which to contract, the eventual acceptance by the respondent was both after the fact and thereby null in effect.
Hence, for that reason (and perhaps unnecessary element of the negotiation) the appeal was upheld and judgment awarded to the appellant, while the court reminded the parties that:
“[T]here is a distinction between a counter-offer or a refusal, which does put an end to an offer, and a request for further information which does not amount to a new offer but is to an investigation of the offering party’s position.”