The problem with being too focused on the deal, is that sometimes you don’t record what you think you have both agreed.

In Donovan v Grainmarket (2021), the Court of Appeal said:

  • the task of deciding what the parties had agreed was not easy [as] the parties’ contract was not fully recorded in writing but rather arose from their conduct in the light of the written and oral communications between them.
  • The Heads of Terms did not contain all of the terms which [were] part of the parties’ contract. In particular it did not identify the parties’ respective obligations and… did not set out what conditions, if any, had to be fulfilled in order for [the performance fees] to be earned.

Call me picky, but not setting out what the parties have to do (their obligations) or how they can earn their fees seem like major omissions. It’s almost as if they were working solely on trust and couldn’t be bothered with pernickety details like duties and dues.

The court had to try and interpret what the contract meant in the context of the commercial background as well as any terms which were recorded. However, it acknowledged that ‘where the contract is partly in writing, but also found in oral communications and the parties’ conduct, the process [of working out the contract’s terms] is likely to be less clear-cut‘ (putting it mildly imho).

Because of the debate about what terms were included, the court also had to consider whether any terms were implied into the contract – this relies on proving that the term is obvious and necessary ie the contract does not work without it. It is a high hurdle to overcome!

What should you do?

If you can’t get your contract signed, and your T&C have not been otherwise agreed, then the least you should do is record everything that you think you and your contract partner relevant to the scope (ie what you are both doing including what will be paid).

If you don’t record the scope clearly, then you will undermine trust, fail to record the aims of the agreement and leave yourself open to risks including the risk of performance disputes.

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on LinkedIn
Share on pinterest
Share on Pinterest

Leave a comment