Don't let traders use mobiles

Author: | Published: 1 Oct 2007

In the case of Bear Stearns Bank plc v Forum Global Equity Ltd [2007], the UK's High Court was required to consider whether the practice of trading securities orally with written, detailed terms to follow complied with the basic principles of contract law.

The parties' agreement (concluded by telephone) in respect of notes representing distressed Parmalat debt was found to be binding. Although only a first instance decision, the judgment of Justice Andrew Smith is important since it endorses perceived market practice in relation to the method of execution and documentation of trades in the distressed debt market. But it will also be of wider interest to all financial markets participants who conduct business orally, supported by later written confirmations.

The Court also gave useful guidance on the approach to measuring loss for breach of share sale agreements.

The case The claimant, Bear Stearns, negotiated the purchase of some distressed debt...