Marco Pierre-White received bad publicity when he tried to sue his former business partners on an oral agreement which he claimed they had reached between them. His evidence was not found to be reliable by the Judge and therefore his partners’ version of events was believed over his. Mr Pierre-White ended up being branded a “dishonest idiot” and leaving court with a bill for costs which reportedly amounted to £0.5 million. Once again we are clearly reminded of the dangers of failing to get an agreement formalised in writing.
It is true that in law an agreement does not have to be in writing. The key elements needed to form a contract are:
- intention to create legal relations
- certainty of terms
As long as these key elements are present, following negotiation, it is possible to enforce an oral agreement. However, a written agreement provides clear evidence of the terms that were agreed.
Mr Pierre-White believed that he was owed £175,000 in shares in return for the use of his name on “The Yew Tree”. His partners’ recollection of the agreement was different. The case came down to whose evidence was more reliable on the day.
When a court is left to interpret the intentions of parties, and analyse the facts, it can be extremely time consuming and costly. This case serves as a reminder that resolving misunderstandings in court can be extremely expensive. A properly drafted written agreement removes this uncertainty and can reduce or avoid expense in the event of a later disagreement.
Forming a contract
It is much easier to form a contract than you might think. A contract can be a mixture of oral and written terms. It can be made by email or text. Forming a contract can be as easy as a click of a button on a website.
It is important that staff, particularly those involved in sales, are aware of the principles of contract formation – as they could easily (and probably regularly do) bind the company in an agreement. For example, brewers who agree to help each other with overspill production need to agree at the outset how long the arrangement is intended to last, and on what payment and termination terms otherwise disagreements can arise at a later stage.
It is not always appreciated by staff that contracts do not need to be in any particular form and as long as the 5 basic elements (see above) are present, a contract can be legally binding. A contract can therefore be made by email or text. Notice can also be given by email. Evidence of a contract made by email can be produced in court; however, there is no presumption of reliability and you may have to prove the timing of a transaction and that your evidence is genuine and complete.
Keeping your agreements watertight
If you need assistance with drafting, enforcement and variation of any of your commercial contracts please contact Christopher Ainsworth on 0345 2716754 for advice.
The content of this page is a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.