18 August 2017 by

STOP PRESS: Pub ‘banter’ not legally binding contract!

In a High Court trial last month, much of the evidence focused on a night at the pub, back in 2013, attended by (among others) the businessman Mike Ashley and one of his then associates, Jeffrey Blue. The pints, we are assured, kept coming ‘like machine guns’.

At one point during the evening, Mr Ashley said he would pay Mr Blue a £15 million ‘bonus’ if Mr Blue – an investment banker – could get the price of shares in Sports Direct International plc (the retail company in which Mr Ashley held – and still holds – a controlling stake) up from £4.00 to £8.00 per share. Those in the pub had a bit of a laugh. But 13 months later in 2014, the share price hit £8.00.

Fast forward to July 2017, and Mr Blue’s barrister is in court arguing that the conversation between the two men amounted to a verbal contract, and so the £15 million was due to his client. By the judge’s own admission, the finer details of the night itself were entertaining, but it was not a surprise to very many that Mr Blue’s claim ultimately failed.

The judgment set out several reasons for this, but the key message is that verbal discussions which take place in a pub or similar informal environment – and which are ordinarily regarded as nothing more than ‘banter’ – are unlikely to be able to form the basis of a binding, legal agreement.

In passing judgment, the Court said that “…no reasonable person present in the Horse & Groom on 24 January 2013 would have thought that the offer to pay Mr Blue £15 million was serious and was intended to create a contract and no one who was actually present in the Horse & Groom that evening – including Mr Blue – did in fact think so at the time. They all thought it was a joke. The fact that Mr Blue has since convinced himself that the offer was a serious one and that a legally binding agreement was made, shows only that the human capacity for wishful thinking knows few bounds.”

The 4 basic elements needed to form a binding contract are that:

  1. the parties must reach an agreement i.e. a clear offer must be made, which must be accepted;
  2. the parties must intend that agreement to be legally-binding;
  3. the agreement must also be supported by a payment or some other form of consideration; and
  4. the terms of the agreement must be sufficiently certain and complete in order to be enforceable.

If your business can involve you entering into verbal agreements, in a social/informal setting or any other context, the importance of recording those agreements in writing – at least in some form – cannot be over-emphasised. Especially if you happen to be in a pub somewhere with Mike Ashley.

If you need advice on any aspect of your commercial contracts, please contact Adam Forder on 0207 288 4717 or at adamforder@boltburdon.co.uk.

Or you can contact one of our other Corporate and Commercial solicitors here.

4 August 2017 by

Employment Tribunal is now free to use and you may be entitled to a rebate

Last week’s shockwave ruling by the Supreme Court means that: It is now free for employees to bring a claim […]

11 August 2017 by

Understanding the risks of entering into a personal guarantee

Directors will often be required to give a personal guarantee as security for a loan provided by a lender to […]

Signup To Our Weekly e-News

"*" indicates required fields

We’ll never share your details with any third party in line with our privacy policy.