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Did parties intend to be contractually bound when negotiating in a pub?

Posted: 13th September 2017   In: Corporate Commercial

Blue v Ashley [2017] EWHC 1928, 26 July 2017

In English Law, there must be an intention to be legally bound for a contract to be binding on the parties. In the very recent case of Blue v Ashley, the High Court considered whether the parties had this intention in an informal pub setting. In assessing this, the Court uses an objective test.

The facts of the case were as follows. Mr Blue was a banker engaged by Sports Direct in consultancy services. He arranged a meeting with Mr Ashley, the founder and majority shareholder of Sports Direct, and three investment bankers in a pub. They drank two or three pints of beer before moving onto other locations, and it is estimated that they consumed around 8 pints over the course of the evening.

The parties allegedly came to an agreement in relation to the price of Sports Direct shares to incentivise Mr Blue in the first pub, but this agreement was not recorded in writing.

The High Court held that there was no legal contract as there was no intention to be contractually bound. Although there could be such an intention in an informal setting, an evening drinking with three investment bankers in a pub is an unlikely setting to negotiate such a deal. The purpose of the meeting was to introduce Mr Ashley, not to negotiate this agreement. Further evidence was given that the discussions were jovial in nature, and the court also considered the fact that it did not make commercial sense for Mr Ashley to enter into such an agreement and it would be out of character for him to do so.

The Judge applied the necessary objective test and found that overall no reasonable person would believe that the agreement made was serious and capable of being contractually binding.

Please contact Sing Li or Holly Baker if you would like further information about the issues raised in this article or assistance in drawing up legally binding commercial contracts.

Posted by: Sing Li
Corporate Commercial
Luton Office