In the recent decision of Gibbs v Lakeside Developments Ltd [2016] EWHC 2203 (Ch) (12 July 2016) the High Court held that an email which purported to accept a settlement offer, but in reality varied one of the key terms of that offer, was not valid acceptance. It was in fact a counter-offer. In addition the court considered the extent to which the court may have regard to inter-party correspondence when deciding such issues.

The original case arose from a dispute over the forfeiture of a lease. As the trial date approached the parties entered into settlement discussions and on 1 March 2016 the appellant sent a letter to the respondent offering to settle the dispute for £90,000. The offer was made on the condition that it be accepted by 9 March and the monies transferred by 16 March.

The respondent’s solicitors replied to the letter by email on 8 March with the opening sentence: “The claimant accepts your offer”. However, attached to the email was a draft consent order, which stated that payment of the settlement monies would be made by 8 April, rather than 16 March. Further correspondence between the parties made clear that the respondent viewed their email as an unequivocal acceptance of the settlement offer, but the appellant disagreed.

The issue in dispute was whether the opening sentence of the respondent's email was a valid and binding acceptance of the offer despite the fact that the attached consent order sought to vary its terms.

In considering the issue on appeal, Arnold J held that the first instance judge was correct to conclude that the disputed email was a counter-offer rather than an acceptance. He reasoned that the settlement offer should be viewed as a package containing two, distinct elements: the acceptance of the settlement sum by the specified date and the making of payment to the appellant by the specified date.

The respondent’s email had accepted the first element of the offer, but by putting forward an alternative date for repayment, the second element had been clearly rejected. Arnold J therefore concluded that, in spite of the fact that the email opened with an apparently clear statement of the respondent’s intentions, it could not constitute a binding acceptance of the offer.

Arnold J went on to consider the issue of whether the court should be entitled to take into account the entirety of the communications between the parties when considering whether a valid agreement has been reached.

Here, he disagreed with the approach taken by the County Court, citing the recent endorsement by the Supreme Court, in RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH [2010] UK S13, of the principle set out by Lloyd LJ in Pagnan SPA v Feed Product Ltd [1987], that:

"In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole …"

This judgment emphasises the need for clarity in all communications relating to both offer and acceptance. Parties attempting to accept offers to contract should take care not to directly or indirectly reject any of the terms of the offer, as doing so may act to invalidate their acceptance.