Gladman Developments Ltd v Sutton & Ors

An oral agreement to promote land may be legally binding, but agreement on commercial essentials does not necessarily create an immediately binding contract. The court must objectively assess whether the parties intended legal relations and agreed all terms essential to a binding relationship. Where the transaction is complex, subsequent preparation and execution of a written agreement may indicate that negotiations were only in principle. Documentary evidence and the known or probable facts may carry greater weight than recollections of conversations. A course of dealings conducted on a subject to contract basis may demonstrate that no binding agreement was concluded.

Gladman Developments Ltd claimed that it had made a binding oral agreement with the defendants to promote approximately 70 acres of their Bent Farm land for housing development. The alleged agreement was said to have been made at a meeting on 12 March 2012 or during a telephone conversation later that month. The defendants denied that any agreement had been concluded and relied on the subsequent negotiation of a written promotion agreement.

The central issue was whether the parties had objectively intended to create legal relations and had agreed all terms essential to a binding contract, or whether they had reached only an agreement in principle pending a formal written agreement.

1. Formation of contract. A promotion agreement need not be in writing and the absence of an executed agreement does not, by itself, prevent an oral contract. The question is objective: whether the parties intended to create legal relations and agreed all terms essential to a binding relationship. In a complex commercial transaction, the complexity of the subject matter and terms may make it more likely that the parties intended to await a written document prepared or reviewed by lawyers (Cheverny Consulting Ltd v Whitehead Mann Ltd [2006] EWCA Civ 1303 at [42]; RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG [2010] UKSC 14 at [45]).
2. Evaluation of evidence. In a commercial case involving recollections of past conversations, little reliance should ordinarily be placed on memory alone. Documentary evidence and inferences from known or probable facts provide a more reliable basis for factual findings (Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) at [15]-[22]).
3. Application. Although the parties had discussed the land, the £100,000 payment and the 20 per cent promoter’s proportion, the meeting was for consideration of GDL’s proposal. The subsequent document referred to an offer and proposal, contemplated an agreement yet to be made, and was followed by correspondence marked Subject to Contract. GDL’s own lawyer understood the position to be an agreement in principle pending a promotion agreement.
4. The evidence did not establish that the parties intended to be bound by a free-standing oral agreement. The claim was dismissed. The defendants’ fallback case on repudiation and termination therefore did not require determination.

Not stated in the judgment.