Do you know your place?
According to the English courts, the very idea that a sophisticated contract was negotiated with the host of a posh drinks reception at the Wallace Collection, London would have been ‘socially dysfunctional and commercially inappropriate‘.
A company specialisting in advice for mergers and acquisitions (Moorgate Capital) launched a claim for £1m against a private equity firm (HIG European) based on an oral agreement made at a drinks reception.
Was there an oral contract?
The court refused to accept there was an agreement between the companies for the payment of fees for any advice based on (among the list of ten reasons why not):
- denial by one of the people alleged to have made the oral contract: denied in principle – the company’s usual practice was not to enter into the type of contract alleged; he also denied it would have been made at that event, or – if he had – he would have remembered it
- no supporting evidence: there was not a single email or text or record of the deal following the drinks reception
- the occasion: doing a deal at that sort of event was inherently unlikely and against social and corporate norms
- the implausibility of the content of the alleged contract: it was inherently unlikely to agree a fee based on a financial information that was a ‘moving feast’
- lack of authority: the matter was being dealt with by a colleague and it was unlikely that the drinks host would have finalised it ‘without so much as word‘ to the person in charge
- lack of negotiation: it was implausible that the drinks host agreed to proposed terms without negotiation or enquiry into the services to be provided.
What do you need for a contract?
The legal requirements for a contract (under English law) are:
- offer and acceptance (of which there was no evidence)
- consideration (something of value ie advice for cash)
- intention (presumed to exist for B2B but not necessarily at a drinks reception)
- certainty (the judge said if there had been a contract, he would have needed some persuading that it wasn’t certain enough to be binding).
Even if the claimant had overcome the evidential issues listed above, the judge said
What should you do?
Follow the judge’s advice: ‘it is a simple matter of common business sense to suppose that, if an [oral] agreement had been made… both sides to the agreement would have wanted a documentary record of it‘
Agree first, document second, then start work!
Case: Moorgate Capital (Corporate Finance) Ltd v H.I.G. European Capital Partners LLP  EWHC 1421