Charlotte Davies looks at two recent decisions of the Commercial Court that provide useful illustrations of the Court’s approach to cases involving alleged oral contracts and demonstrate some of the pitfalls in such claims.
Blue v Ashley – the facts
Judgment in the much-publicised case of Jeffrey Ross Blue v Michael James Wallace Ashley  EWHC 1928 (Comm) was handed down in July 2017.
The case concerned an oral agreement that Mr Blue, a financial consultant to Sports Direct plc, said had been made with its owner Mr Ashley. The agreement alleged was that if Mr Blue could get the Sports Direct share price to £8, Mr Ashley would pay him £15 million. Surprisingly, the location of this valuable agreement was not the boardroom but the Horse & Groom pub on Great Portland Street (although according to Mr Blue, this was not particularly unusual given Mr Ashley’s unorthodox approach to business meetings). On Mr Blue’s own case, he had not raised the alleged agreement with Mr Ashley for nearly a year, nor did he have any contemporaneous note of their conversation.
In February 2014 the Sports Direct share price reached £8 per share. When Mr Ashley failed to honour the alleged agreement to pay him £15 million, Mr Blue issued a claim for breach of contract. Mr Ashley, whose evidence included memorable phrases such as “pints coming like machine guns”, accepted there may have been some discussion about share prices but denied there had been any intention to create legal relations and therefore that any legally binding agreement had been reached.
Wright v Rowland – the facts
The case of Wright v Rowland and another  EWHC 2478 (Comm), in which judgment was handed down in October 2017, also concerned a financial consultant claiming breach of an oral agreement although this time the setting for that agreement was rather more glamorous.
Mr Wright provided consultancy services to various Rowland family businesses. He alleged that in 2008, he was responsible for the introduction of the Rowlands to the former Chairman of Kaupthing Luxembourg, and that he then worked as a as a senior member of their deal team to negotiate, structure and close an acquisition of the bank. The transaction involved the demerger of Kaupthing Luxembourg into a private bank called Banque Havilland S.A (“BH”) incorporated in Luxembourg as a public company limited by shares, and a special purpose vehicle. According to Mr Wright, at a party held on 20 July 2009 board the Rowlands’ yacht in the south of France, an oral agreement was reached between himself and the Rowlands that (amongst other things) granted him an option to purchase up to 5% of the shares in BH for the same proportionate price that the Rowlands had paid to acquire the entire issued share capital of BH, i.e. €50 million. The Rowlands subsequently denied that they had made any such agreement with him.
In June 2015, Mr Wright issued a claim form for damages for breach of contract, relying on the agreement he said had been reached on board the yacht (as well as an alternative claim for a quantum meruit). The Rowlands denied that any such discussion had taken place, but argued that even if it had, these were informal discussions with no intention to create legal relations, and which were too uncertain and incomplete to amount to a binding agreement.
Both Mr Blue and Mr Wright failed in their claims of breach of contract.
In the first case of Blue v Ashley, Leggatt J found that whilst Mr Ashley had “agreed” on 24 January 2013 to pay Mr Blue £15 million if he could get the Sports Direct share price to £8 per share (within an unspecified time), he was quite sure that this could not reasonably have been understood as a serious offer capable of creating a legally binding contract.
In the second case of Wright v Rowland, Mr Christopher Butcher Q.C. found that whilst it was probable that there was some discussion of Mr Wright’s remuneration on board the yacht on 20 July 2009, there was no agreement on the terms alleged and in any event, it was objectively apparent that this discussion did not give rise to any legally binding relations between them.
There are a number of similarities in the approach taken in the two judgments:
What should you draw from these cases?
Whilst every case will depend on its facts, these two judgments provide a useful reminder of the nature of the exercise the Court will undertake when faced with an alleged oral contract: