Closing A Distressed Debt Trade Over The Phone - The Binding Basics

The High Court provided some extremely useful guidance in relation to oral contracts in the context of distressed debt trading in the decision of Bear Stearns Bank plc v Forum Global Equity Ltd [2007] EWHC 1576 (Comm) handed down last week.

For participants in financial markets generally where it is the norm to reach agreement orally after telephone negotiations, this decision provides welcome assurance that once material terms are agreed, such agreements are not easily avoided by claims of uncertainty or incompleteness, the Courts looking to substance over form in assessing whether a valid bargain has been struck. That begs the question of what material terms will be sufficient. What readers are likely to find illuminating and perhaps surprising from this case is that agreement on few very basic terms can be sufficient to create a binding trade - that is, even absent standard terms published by industry associations such as the UK Loan Market Association (the "LMA"). This article