Tests For Whether There Is A Binding Agreement

Mehboob Travel Limited & Others and Pakistan International Airline Corp QBD

Mehboob and the other Plaintiffs were travel companies in dispute with PIA about payment of commission. They entered into negotiations to settle the dispute. A "memorandum of understanding" was signed by PIA and two of the claimants. PIA submitted that the MOU was a binding contract and that all the claimants had been bound by actual or apparent authority.

Not surprisingly, the High Court rejected the claim. There is no full judgment, but the case note provides a useful list of matters to be borne in mind in determining the issue:

• whether there was a binding contract was not a question of the subjective state of mind of the parties, but what they had objectively agreed.