Commercial Negotiations – Talk is Cheap But Writing is Binding
12 Nov 2021
Commercial negotiations often involve many meetings and any amount of talk, but the question of whether anything has actually been agreed is a common source of dispute. As a High Court case showed, the only real way to avoid such discord is to engage a solicitor to record agreements formally, in writing.
The case concerned a businessman who, via his corporate vehicle, was instrumental in arranging a lucrative contract by which a club engaged the services of a mutual management company for four years. He launched proceedings after the company denied that he was entitled to an introduction fee or any other form of remuneration for the contribution he had made to achieving the deal.
Ruling on the matter, the Court noted that there was no dispute that the deal was the businessman’s brainchild and that it was he who affected the introduction between the two willing parties to the contract. He was a highly necessary and active participant and had been involved in the negotiations throughout.
The company’s policy, however, was never to pay referral or introduction fees. There had been some discussion of the issue, but the company never expressly agreed, either orally or in writing, to pay the businessman an introduction fee, still less the basis on which such a fee would be calculated.
In upholding the businessman’s claim, however, the Court found that it must have been obvious to the company that he was not acting simply from the goodness of his heart. There was a common understanding that he would receive some financial reward if the negotiations bore fruit. There was a sufficient meeting of minds to impose a contractual obligation on the company to pay him a reasonable fee.
Given the extent of his contribution to the successful deal, failing to afford him any financial reward would be unjust. If he were denied a fee, the company, which had garnered a handsome profit from the contract, would be unjustly enriched. The businessman’s corporate vehicle was awarded £212,294, that sum representing 10 per cent of the profit the company had made on the deal. It was also entitled to a 10 per cent share of future relevant profits.