A recent High Court case focused on whether an agreement made in the pub could be viewed as a legal contract. Kirsty Davey, Partner and Head of Corporate and Commercial at Coodes Solicitors, explains.
In my experience, a lot of business is done in the pub. These conversations are often a great starting point for more formal agreements later made in the boardroom and confirmed in written contracts. In fact, as a corporate and commercial lawyer you may be surprised by the number of times I have been handed agreements drafted on scraps of paper, and even on the clichéd back of a fag packet.
In a recent case a group of bankers met a consultant in the pub. Over the course of the evening, a number of figures were banded around about how much money the consultant could make. One of the bankers said that the consultant could make a £15million bonus if the share prices doubled. When the share prices rose, the consultant asked for the amount previously discussed in the pub. The bank refused, so the consultant took them to court. However, the bank argued that this was just an informal discussion and the figure had been meant purely as a joke. The High Court held that there was no oral agreement to pay the consultant £15million as no reasonable business person would think that this represented a serious contractual offer.
This case is a fairly extreme example of why businesses need to formalise any agreement with a written contract. An informal meeting – whether it is in the pub, a café or even on the business premises – can be a good way to start a conversation. It is very difficult to evidence an oral agreement if no written record was made. A business should confirm any verbal agreement in writing – either with an email or letter. For more serious agreements, such as those involving payment for services, a contract is the best way to seal the deal.
A pub can be a great place to network and develop business relationships but it is clearly not the right place to form legally binding business agreements.
For advice on these issues, please contact Kirsty Davey at Coodes Solicitors on 0800 328 3282 or email@example.com
For advice on handling a business dispute, please contact Abi Lutey on 0800 328 3282 or firstname.lastname@example.org