- Created by: Former Member
- Created on: 08-12-19 19:07
The agreement between the two companies included an 'Honourable Pledge Clause'. The clause specifically stated that it was not entered into as a 'formal or legal agreement', but was only a definite expression and record of the intention of the
parties. The parties 'honourably pledged' themselves to the agreement in the confidence 'that it will be carried through by each of the ... parties with mutual loyalty and friendly co-operation'.
By agreement, the claimants had been appointed sole US agents of the defendants. The agreement contained the following clause:
This arrangement is not entered into, nor is this memorandum written, as a formal or legal agreement, and shall not be subject to legal jurisdiction in the Law Courts either of the United States or England, but it is only a definite expression and record of the purpose and intention of the three parties concerned to which they each honourably pledge themselves with the fullest confidence, based on past business with each other, that it will be carried through by each of the three parties with mutual loyalty and friendly co-operation.
The defendants terminated the agency agreement without the required notice and refused to execute orders received before termination. The claimants brought an action for breach of contract and non-delivery of the goods for which orders had already been placed.
(p. 196)  2 KB 261 (CA)
The Court of Appeal held there was no binding contract and consequently there could be no action based upon it. A majority (Atkin LJ dissenting) also held that the orders and acceptances of those orders were not legally binding contracts to deliver.
ATKIN LJ: To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly. Such an intention ordinarily will be inferred when parties enter into…