No Proper Paperwork, No Binding Contract

The Commercial Court reverses six arbitration awards and holds that no binding contracts were formed between the parties in the absence of contracts prepared and signed in accordance with terms agreed during negotiations.

The recent decision of Mr Justice David Steel of the English Commercial Court in Pacific Inter-Link SDN BHD v EFKO Food Ingredients Ltd (2011) serves as a forceful reminder that trading parties need to ensure that agreements are properly concluded, otherwise there is a risk that no binding contract will come into existence.

The claimant, Pacific Inter-Link (PIL) was a Malaysian company trading in palm oil. The defendant, EFKO Food Ingredients (EFKO), was a Russian-based company engaged in the sale and purchase of oils and fats. PIL appealed six FOSFA arbitration awards in the English Commercial Court on the grounds that, inter alia, FOSFA had no jurisdiction to determine the disputes.