Schweppe v Harper

An oral fee arrangement is not enforceable where essential terms of the finance required to earn the fee were neither agreed nor objectively ascertainable. Contractual certainty is assessed when the arrangement is made. Later work, part performance or the prospect of a substantial benefit cannot cure an agreement that was too uncertain at formation. A term requiring acceptance of reasonable finance cannot be implied where essential matters remain at large. The majority held that no binding contract arose.

Mr Schweppe worked for Mr Harper to secure the annulment of Mr Harper’s bankruptcy and the preservation of his properties. At a meeting on 26 November 2003, Mr Harper agreed orally to pay a fee of £50,000 if the task was completed. Mr Harper later withdrew Mr Schweppe’s authority while negotiations for third-party finance remained incomplete.

The county court found an oral arrangement, but held that the fee depended on annulment being achieved with finance arranged by Mr Schweppe and that Mr Harper could withdraw at will. The claim for the fee and damages was dismissed. The appeal concerned whether the arrangement was a bilateral or unilateral contract, whether its terms were sufficiently certain, and whether Mr Harper could withdraw before completion.

By a majority, Dyson LJ and Sir Robin Auld dismissed the appeal. Waller LJ would have allowed it.

1. Nature of the arrangement. Dyson LJ considered that the judge’s findings pointed to mutual promises: Mr Schweppe was to arrange finance and secure annulment in return for the fee. The arrangement was therefore bilateral or, at most, an offer subject to the ordinary requirements of contractual certainty. A unilateral analysis could not avoid that requirement.
2. Uncertainty. The essential finance terms had not been agreed. They included the amount, arrangement fee, interest rate, duration, repayment terms and security or other consideration. The requirement that finance be acceptable to Mr Harper supplied no objective standard. Applying the reasoning in Lee-Parker v Izzet (No 2) [1972] 1 WLR 775, the majority held that the arrangement was too uncertain to be a contract. The possibility of implying a term requiring reasonable finance did not cure the defect.
3. Formation and cooperation. Certainty had to be judged by reference to what was agreed on 26 November 2003. The substantial work later performed by Mr Schweppe could not turn an uncertain arrangement into a binding contract. An implied term requiring Mr Harper to cooperate or refrain from prevention was also inconsistent with the dependence of the arrangement on his satisfaction with the finance.
4. Annulment. Dyson LJ observed that annulment under the Insolvency Act 1986, section 282(1)(b), involved judicial discretion. Any contractual obligation, if one had existed, could therefore require only reasonable endeavours and would ordinarily be performed within a reasonable time. This was alternative reasoning, since the majority found no contract.
5. Dissent and orders. Waller LJ considered that Mr Schweppe’s part performance of a unilateral offer made it irrevocable and required Mr Harper to cooperate. He would have treated the withdrawal as repudiatory, but assessed damages as a loss of a chance rather than the full fee, awarding £25,000. The court refused permission to appeal to the House of Lords. Costs followed the event, subject to a stay if a timely application was pursued diligently.

• Court of Appeal (Civil Division): Appeal dismissed by Dyson LJ and Sir Robin Auld; Waller LJ dissented and would have allowed the appeal.
• Wandsworth County Court: His Honour Judge Winstanley, on 15 December 2006, found an oral arrangement concerning a £50,000 fee but held that Mr Harper could withdraw before completion and dismissed the claim.