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UK Court Holds Emailed Slip Constitutes New Stage in Contract Negotiations
London & Bermuda Newsletter
Relying on email as a substitute for the traditional method of scratching a slip can be dangerous.
In negotiations, what the underwriter accepts must be the same as the broker offers. Otherwise, there is no contract.
Scratching leaves little room for doubt that the underwriter is accepting the terms on the slip. Email exchange requires parties to identify what they are offering or accepting by reference. What people mean by their words can be unclear.
The facts in Allianz v Aigaion epitomize the problem. Fortunately, the Court of Appeal there crafted a useful solution.
Here, the reinsurer asked the broker during negotiations to “forward slip soonest for our agreement”. The broker did so as an email attachment. The slip omitted a class warranty previously stipulated by the reinsurer and agreed between the parties. The reinsurer, presumably failing to notice the omission, replied “Cover is bound with effect from 31.03.05. as we had quoted…”.
Following a casualty, and on noticing the omission, the reinsurer argued that its email could not be an acceptance. “As we had quoted” referred to the pre-slip offer, with warranty, the reinsurer argued, so it did not accept the slip but instead had “counteroffered” original terms. Thus, there was no reinsurance, it argued.
The Court disagreed, holding that the slip starts a new stage in negotiations. It becomes “the definitive reference point” and eclipses previous offers. Subsequent communications should be taken as referring to the slip, warts and all, unless they clearly indicate the contrary.
This brings email closer to the certainty of scratching. But it is still a pale substitute for a signature, even on a pdf. Since it seems draft slips trump prior offers, the case illustrates the importance of checking attachments carefully.
Allianz Insurance Company – Egypt v Aigaion Insurance Company S.A. ([2008] EWCA Civ 1455)
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