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Singapore Court of Appeal finds arbitration agreement contained in standard terms incorporated into a contract made by email

The Singapore Court of Appeal has allowed an appeal against a decision of the Singapore High Court, finding that standard terms (containing an arbitration agreement) sent by one party after the essential terms to the transaction had been agreed upon, were nonetheless incorporated into the agreement between the parties.

R1 International, a Singapore incorporated company, supplied natural rubber to Lonstroff AG, a Swiss incorporated company, under several orders. The first and second orders were confirmed by email and subsequently, sales contracts purporting to incorporate the terms of the International Rubber Association Contract (“IRAC”), including an arbitration clause, were sent to Lonstroff for their acceptance and signature. In each case, Lonstroff did not sign the sales contract, but duly took delivery of the goods supplied, and paid the amount of the invoice. A further three orders were subsequently concluded by email and on these occasions, Lonstroff attempted to impose its own standard terms once the email confirmations had been made. However, these were not accepted by R1 International.

When a dispute arose on the second order, Lonstroff commenced proceedings before the Swiss Courts. The Singapore High Court initially granted an interim anti-suit injunction restraining the Swiss action, but subsequently accepted Lonstroff’s application that the interim anti-suit injunction should be discharged on the basis that the IRAC terms were not incorporated into the agreement for the second order. The High Court simultaneously rejected an application by R1 International that the anti-suit injuction be made permanent (although it found it had the power to do so under section 4(10) of the Singapore Civil Law Act). R1 appealed to the Court of Appeal.

In allowing the appeal, the Court of Appeal held that whether the IRAC terms (including the arbitration clause) had been incorporated into the contract for the second order turned on the intention of the parties as gleaned objectively by the Court, having regard to the relevant background, including the industry the parties operated in. The Court of Appeal accepted R1 International’s submission that it was market practice for the international sale of rubber commodities that parties would first agree the essential commercial terms of a transaction, followed by further terms. The Court further found that the order made by email had not addressed important terms of the transaction and that the parties would reasonably have expected terms addressing such matters to have been subsequently incorporated into their agreement. This shared expectation of the parties was evidenced by Lonstroff’s attempts to impose its own standard terms following the agreement by email of the essential terms of the third, fourth and fifth orders.

Having found that the parties did not expect the email orders to reflect the complete agreement between them, the Court held that on the facts, Lonstroff’s failure to comment on the IRAC terms amounted to consent and acceptance of them. The IRAC terms, and the arbitration agreement therein, were therefore found to be incorporated into the parties’ agreement.

This decision demonstrates the Singapore Courts’ willingness to consider the wider commercial background between parties when interpreting contractual agreements. It also provides a further example of the Courts upholding agreements between parties to submit their disputes to arbitration.

Case: R1 International Pte ltd v Lonstroff AG [2014] SGCA 56

*A version of this article was originally published by Practical Law Arbitration http://uk.practicallaw.com/country/arbitration