Large sums of money and even bigger personalities.

This post has been contributed by Professor Roger Halson, Module Convenor for Contract law.

There is a saying that you wait a long time for a London bus to arrive and then two come at once. The same tendency was noted in a legal context by the distinguished American academic and ‘father’ of the United States Uniform Commercial Code, who once said that ‘leading cases hunt in pairs’. Recently we have been treated to an example of this phenomenon in the law of contract. Cases dealing with the contractual requirement that a contract must be supported by an intention to create legal relations do not occur very often. However in the last year two such cases came before the High Court.

Newcastle footballIn the first case, Blue v Ashley [2017] EWHC 1928 the claimant was a financial consultant advising Mike Ashley the majority shareholder in Newcastle FC. The Judge accepted as ‘more likely than not’ that at a meeting in a pub, when all present were consuming alcohol,  Mr Ashley offered to pay the claimant £15M if the claimant caused the share price of the defendant’s company to double in value. When the share price exceeded this figure Mr Ashley paid the claimant £1M but the claimant then sought the balance he said he was owed, some £14M.

Leggatt J held that, notwithstanding evidence that Mr Ashley routinely served alcoholic drinks at senior management meetings, a statement made in an informal  pub meeting when all were drinking alcohol was not intended to be contractually binding. This conclusion was supported by the joking nature of the conversation and the lack of any agreed timescale within which the increase must occur. Further the failure to specify any time period meant the undertaking lacked the necessary certainty and there was no evidence that it was the claimant’s work which caused the increase in the share price.

Grilled salmonThe setting for the meeting in the second case MacInnes v Gross [2017] EWHC 46 (QB) was distinctly more ‘upmarket’ . The claimant alleged that over dinner at Zuma, an exclusive restaurant in Mayfair, London the defendant promised that if the claimant gave up his current job to provide services to the defendant he would be paid a sum of money when the defendant sold his business. This sum was calculated to be 13.5M euros. After the dinner the claimant sent an email expressing delight that they were ‘agreed on headline terms’. Nine months later the defendant replied positively but saying that at their next meeting ‘let’s make a proper contract’.

The judge began by recognising that a contract can be made anywhere in any circumstances. However when the meeting takes place in a ‘highly informal and relaxed setting’ courts will closely scrutinise the suggestion that despite the setting there was an intention to create legal relations. No such intention could be found on this occasion and this was further corroborated by the lack of detail and certainty in the parties discussions and perhaps crucially that the subsequent correspondence indicated that at the earlier meeting the parties did not consider themselves to be contractually bound.

In conclusion it seems that whether your preference is for ‘gourmet dining’ or ‘pub grub’, or indeed ‘a drink with no grub’ an agreement concluded at an informal meeting will not readily be found to evidence an intention to

One comment

  1. I agreed to the court’s decision while it made me even think whether verbal commitment can be legally bound.

Leave a Reply