“My Word is my Bond” No Written Contract, Can’t Prove Agreement…….What Next?

“My word is my bond”;

“A contract is a contract is a contract”;

“A gentleman’s/gentlewoman’s word is their bond”.

We all often think we know what we mean by the above.  The Law recognises only one contractual arrangement, and that is a legally binding contract between two or more parties.  It is perfectly possible to have an oral contract with nothing written down, written contracts are just easier to identify because, for one thing, you can point to them.

A recent case has re-examined what happens when, where there is no written contract, one party alleges that there was an oral, or unsigned, agreement in place.

The case AMP Advisory & Management Partners AG v Force India Formula One Team Limited (in Liquidation) involved AMP, who are a sports marketing agency. AMP was claiming a percentage of receipts that arose under the Sponsorship Agreement entered into between Force India and BWT AG.

AMP claimed that either an oral contract had been reached for a then unspecified amount of commission, or later on a payment of 15% commission had been agreed, or failing all of this that Force India would be “unjustly enriched” by a failure to pay AMP anything for the work that they had done in both introducing and/or brokering the contract.

What did the Court look at?

The Court looked at each of those three issues and the Court looked at the fact of some oral discussions and found it unlikely that a contract had been reached because of the very limited information that had been exchanged.  A contract needs several essential terms to exist but also an intention on both sides to make a legally binding agreement and the Court found on the evidence that this test was not passed.

The parties had circulated, later, a draft written contract but Force India had included the words in the agreement “shall take effect upon signature”.  Although Force India had used “happy to pay” and “all agreed” in correspondence, AMP kept chasing signature and neither side had agreed to waive the need for the document to be signed.  In addition, the evidence before the Court from experts was that there were no arrangements in Formula One that would proceed without any unsigned agreements whatsoever.

Because both claims in contract had failed the Court looked at whether AMP had what is known as a “quantum meruit” claim, which went forward on the basis that Force India had been “unjustly enriched” by failing to pay sums to AMP either for the introduction or the work undertaken and brokerage services that led to the conclusion of the BWT contract.

Unjust enrichment has four questions that have to be answered.  The first is whether the Defendant has actually been enriched, the second whether this is  the Claimant’s expense, the third is whether that enrichment is unjust and the fourth is whether there are any defences available.

The introduction aspect failed on the failed on the facts because AMP had not actually made the initial introduction, but the second part (about brokering the agreement) was successful as AMP’s “contribution” to getting the deal done was recognised, but was also limited in nature.

The Court agreed that it would be unjust not to pay AMP.  They had clearly always intended to be paid, would not provide the services for free on a normal basis and, although the emails back from Force India did not satisfy the contractual test, they had been encouraging and AMP had been led to understand that they would indeed be paid.

Basis of payment

The Court accepted the test found in an earlier case called Bennedetti which is that the Court’s task must be to determine “the price which a reasonable person in the Defendant’s position would have had to pay for the services”.  On the facts the Court disagreed with the experts and determined that the correct amount was an amount greater than the sum suggested by those experts but one that still reflected the limited nature of the actual work undertaken.  The Court awarded £150,000.00.

This case was decided in September of 2019 and although payment was received by the Claimant it is yet another reminder that parties to a contract should get a contract written, signed and exchanged before performing the work that they attach a value to, or indeed before taking on any liability to make payment.

These “quantum meruit” claims are commonly seen in practice and I have had many cases in the construction arena, as well as brokerage fees involving commercial property agents, deal brokers and the like.  For these types of professionals it can be all too easy, in the heat of the moment, to focus on the deal and the excitement (and time pressures) of bringing people together, but if you do not get your payments written down you cannot guarantee a successful outcome. Even here the amount awarded by the Court was calculated in a different way to that which was being claimed by AMP.

For any issues around the creation of or recording of contracts my Partner Andy Kerr heads up the Company Commercial Team at Wilson Browne Solicitors.  For disputes of a commercial or contractual nature then in the first instance talk to me.