Scottish Coal Company Ltd v Danish Forestry Co Ltd [2010] ScotCS CSIH_56 (25 June 2010)

Scottish Coal Company Ltd v Danish Forestry Co Ltd [2010] ScotCS CSIH_56 (25 June 2010)

The second sentence of clause 10.1 of the Agreement was unenforceable as it amounted to an agreement to agree without sufficient objective criteria, and the finalisation of a ranking agreement was critical to the settlement of the purchase. As no such agreement was reached, there was no concluded contract for the sale. The arbitration clause could not cure this uncertainty, as it only operates where there is a concluded contract. Accordingly, the Agreement was not enforceable as regards the purchase transaction.

Citation
[2010] ScotCS CSIH_56
Parties
Pursuers and Reclaimers: The Scottish Coal Company Limited; Defenders and Respondents: Danish Forestry Company Limited
Jurisdiction
Scotland
Judgment Date
25 June 2010
Procedural Posture
Reclaiming Motion (appeal) From the Outer House, Court of Session / Appellate Judgment (inner House, First Division)
Outcome
Reclaiming motion refused; assoilzies (absolves) Danish Forestry Company Limited from the conclusions of the summons.
Legal Topics
Certainty of Contract, Agreements to Agree, Enforceability of Contractual Terms, Ranking Agreements, Standard Securities, Arbitration Clauses, Repudiation and Rescission
Contract Law Commercial Law Certainty of Contract Agreements to Agree Enforceability of Contractual Terms Ranking Agreements Standard Securities Arbitration Clauses +1 more

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Parties

The Scottish Coal Company Limited

Pursuers and Reclaimers

Danish Forestry Company Limited

Defenders and Respondents

Procedural Posture

Reclaiming Motion (appeal) From the Outer House, Court of Session / Appellate Judgment (inner House, First Division)

Legal Issues

  1. 1 Whether the Purchase Option & Coal Extraction Agreement constituted a concluded and enforceable contract, particularly in relation to the requirement for a ranking agreement under clause 10.1.
  2. 2 Whether the second sentence of clause 10.1 was enforceable or amounted to an unenforceable agreement to agree.
  3. 3 Whether the arbitration clause could cure any uncertainty or provide a mechanism for resolving the lack of agreement on the ranking agreement.

Ratio Decidendi

The second sentence of clause 10.1 of the Agreement was unenforceable as it amounted to an agreement to agree without sufficient objective criteria, and the finalisation of a ranking agreement was critical to the settlement of the purchase. As no such agreement was reached, there was no concluded contract for the sale. The arbitration clause could not cure this uncertainty, as it only operates where there is a concluded contract. Accordingly, the Agreement was not enforceable as regards the purchase transaction.

Court Disposition

Reclaiming motion refused; assoilzies (absolves) Danish Forestry Company Limited from the conclusions of the summons.

Orders

  • Refusal of the reclaiming motion by Scottish Coal Company Limited.
  • Assoilzies (absolves) Danish Forestry Company Limited from conclusion 1(iii) of the summons.