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'Pub Chat' Is Just that

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About Will

By Will Macauley

Blue v Ashley [2017] EWHC 1928

A recent High Court case between Sports Direct boss Mike Ashley and a former Sports Direct consultant has confirmed the fundamental need for intention in the formation of a contract, while also highlighting the litigation risk inherent in oral agreements.

The Case

In January 2013, Mr Ashley sat in the Horse and Groom pub in central London with a number of associates, including a consultant with Sports Direct, Mr Blue. The group were engaged in a lively discussion about incentivising Mr Blue, which led to Mr Ashley to state jovially that if Sports Direct‘s share price doubled, he would pay Mr Blue £15 million. Mr Blue, astounded by the offer, happily agreed.

Fast forward to February 2014: the Sports Direct share price doubled and Mr Blue, believing that he and Mr Ashley were bound by a contract in the Horse and Groom, wanted his £15 million. Mr Ashley, thinking the discussions were nothing more than ‘general banter’, refused to pay. Mr Blue sued.

To form a contract, one requirement is that the parties must intend to create a legal relationship. Following a lengthy trial, with submissions by all those present for the pub discussion, Mr Justice Leggatt was decidedly certain that no contract was formed. He based this decision on various factors, each contributing to the conclusion that the requisite intention was not present. These included the jovial tone of the conversation, the informal pub setting and the lack of commercial sense in the decision, among others.

What does this tell us?

Plainly, one should not agree to pay a consultant £15 million as a joke. However, the underlying legal lesson from this case, and one that cannot be stressed enough, is that if you have an agreement with somebody, be safe and get it in writing.

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