When talking business in a pub, over a drink or two, could you inadvertently create a legally binding contract?

For a contract to be binding there must be an offer, acceptance, an intention to be legally binding, consideration and certainty.  Contrary to popular belief, a contract does not have to be in writing in the vast majority of circumstances; a spoken agreement can be enough to constitute a binding contract.  It is often worth more than the paper it is written on.

In the case of Blue v Ashley (2017) the High Court was asked to consider whether a discussion in a pub regarding a potential bonus could constitute a valid and binding contract.  Mr Blue said that during a conversation in the pub Mr Ashley said he would pay him a bonus of £15 million if the share price of his company doubled within three years.  The share price did double within that time, but Mr Blue (an investment banker) only received a payment of £1 million.  He therefore sued for the remaining £14 million, which he believed was his contractual entitlement.
The court decided that he was not entitled to the £14 million.  They said that no reasonable business person would have considered the meeting in the pub and subsequent conversation to be a genuine contractual offer.  Evidence given at court suggested the reference to a £15 million bonus was a joke and bravado.  There was no intention to create a legal relationship.

The case highlights that agreements made in jest, anger or an unusual social context may not be enforceable, and shows the difficulties that can arise when attempting to enforce an oral agreement.  The case also reinforces the importance of having your agreement written down, and signed and dated by the parties.  If you are in any doubt as to the validity of a contract or have questions about what constitutes a legally binding agreement, please get in touch.  We will be pleased to give you advice on the most appropriate way to record your contract.

If you would like to discuss this matter further please phone Tim Field on 01206 217366 or email on tim.field@birkettlong.co.uk