Branca v Cobarro [1947]
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Branca v Cobarro [1947] KB 854 is a contract law case concerning conditional acceptance. One key point from this case is that, even when there is an expectation of a formal contract after informal terms have been agreed upon, there may still be a binding contract in the interim period. This is particularly true if the proven intention of the parties supports the existence of a binding agreement during the time between the informal agreement and the signing of the formal contract.
The defendant agreed to sell his mushroom farm to the claimant, and in the agreement, the defendant wrote, "This is a provisional agreement until a fully legalised agreement drawn up by a solicitor and embodying all the conditions herewith stated is signed." The claimant paid a deposit but later repudiated the agreement, seeking the return of the deposit on the grounds that there was no binding contract in place.
The Court of Appeal allowed the appeal, stating that a binding contract was in place. The term "provisional agreement" indicated that the parties intended for their agreement to be binding in the interim until replaced by a formal contract.
Lord Greene MR provided insightful analysis, highlighting the significance of the term "provisional agreement" in the context of the entire phrase "until a fully legalised agreement... is signed." According to Lord Greene MR, when the word "provisional" is linked with the word "until," it indicates that the parties intended to be bound during the interim period between the informal agreement and the signing of a formal contract.
He emphasised that the use of the term "provisional" did not suggest that the fully legalised agreement was a condition to be fulfilled before the parties became bound. Instead, the parties expressed a clear intention to hold themselves and each other bound during the interim period, despite the expectation of a formal contract.
This case exemplifies the importance of examining the proven intention of the parties in contractual agreements. Even when parties anticipate a formal contract, the use of language indicating provisional agreement can create a binding contract in the interim period. This decision underscores the principle that parties can be bound by their informal agreement until a formal contract is executed, provided such intention is evident from the terms used in the agreement.
The defendant agreed to sell his mushroom farm to the claimant, and in the agreement, the defendant wrote, "This is a provisional agreement until a fully legalised agreement drawn up by a solicitor and embodying all the conditions herewith stated is signed." The claimant paid a deposit but later repudiated the agreement, seeking the return of the deposit on the grounds that there was no binding contract in place.
The Court of Appeal allowed the appeal, stating that a binding contract was in place. The term "provisional agreement" indicated that the parties intended for their agreement to be binding in the interim until replaced by a formal contract.
Lord Greene MR provided insightful analysis, highlighting the significance of the term "provisional agreement" in the context of the entire phrase "until a fully legalised agreement... is signed." According to Lord Greene MR, when the word "provisional" is linked with the word "until," it indicates that the parties intended to be bound during the interim period between the informal agreement and the signing of a formal contract.
He emphasised that the use of the term "provisional" did not suggest that the fully legalised agreement was a condition to be fulfilled before the parties became bound. Instead, the parties expressed a clear intention to hold themselves and each other bound during the interim period, despite the expectation of a formal contract.
This case exemplifies the importance of examining the proven intention of the parties in contractual agreements. Even when parties anticipate a formal contract, the use of language indicating provisional agreement can create a binding contract in the interim period. This decision underscores the principle that parties can be bound by their informal agreement until a formal contract is executed, provided such intention is evident from the terms used in the agreement.
