In the case of Bear Stearns Bank plc v Forum
Global Equity Ltd , 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...