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What You Do as Well as What You Agree in Writing Matters

It is a common misconception that contracts have to be agreed in writing or orally to be binding. However, a contract can also be valid if it is performed…even if the documentation requires that it must be formally agreed to be valid.

A recent case dealt with just such a circumstance. It involved the well-known 'MasterChef' television programme in the USA. The producers of the show had negotiated with a cookware company to engage in a co-branding exercise whereby the MasterChef programme made use of the cookware company's products in some of its programmes and the cookware company was licensed to use the MasterChef branding in promotion of its own products.

Although there was a memorandum of agreement, negotiations were never finalised and the memorandum specified that it could not itself bind either party until it was properly executed as an agreement.

The cookware manufacturer had returned the memorandum to the MasterChef producers, with some manuscript changes, and supplied more than a ton by weight of cookware for the programmes. The cookware manufacturers also made a request to the producers to allow use of its MasterChef branding at a Homes and Housewares show in Chicago, which was granted.

When invoices were raised on the cookware manufacturer, a dispute arose, the cookware manufacturer claiming that no contract existed between the companies because the contract terms set out in the memorandum had not been executed formally and this was an 'express provision' of the agreement.

The Court of Appeal ruled that the absence of the formal agreement was not fatal since both sides to the agreement had clearly and unequivocally performed actions which confirmed it.

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