Blue v Ashley (Rev 1)

An oral agreement may create a binding contract, including a unilateral reward contract, but its existence, terms and intended legal effect are determined objectively. The absence of writing is not a legal bar, although it may be powerful evidence that no agreement was made. Jocular words spoken in a social drinking setting will not found a contract where a reasonable person would not understand them as a serious offer.

Courts seek to uphold intended bargains. They cannot, however, supply an essential time limit where no objective standard permits a reasonable time to be identified. A claimant alleging that conduct caused a share price to reach a target must prove causation by evidence, not assertion.

The claimant, a consultant to Sports Direct, alleged that the defendant personally agreed in a public house to pay him £15 million if he got the company’s share price to £8. The conversation took place during drinks with three representatives of a prospective corporate broker. The share price later reached that level and the defendant subsequently paid the claimant £1 million.

The claimant contended that the payment and later conversations confirmed the oral agreement. The defendant maintained that the discussion was joking pub banter, was not intended to create legal relations, and was too uncertain to be enforceable. He further denied that the claimant had caused the share price increase. The central questions were whether a binding contract was made and, if so, whether payment had been triggered.

1. The claim was dismissed. The court found that the defendant had said that he would pay the claimant £15 million if the share price reached £8. However, the words did not objectively amount to a serious offer intended to create legal relations.

2. The issue was to be assessed objectively, in the full factual context. The conversation occurred during a heavily social evening in a public house, in the presence of prospective service providers, with alcohol flowing and everyone laughing. Its purpose was to build a relationship with those outsiders, not to negotiate the claimant’s remuneration. The proposed sum was reached by jocular suggestions from traders who had no interest in the claimant’s pay. It made no commercial sense and attributed an implausible ability to the claimant to cause a listed company’s share price to double.

3. The vagueness of the proposal reinforced that conclusion. It did not define the work required, the measure of its effect, or the period within which the target had to be attained. Although the court will strive to give effect to an intended contract, the absence of an agreed time limit was independently fatal. There was no objective standard by which the court could imply a reasonable period for attaining the target.

4. The later events did not show that the defendant had acknowledged a contractual £15 million obligation. The £1 million payment was more probably connected with discussions about the claimant becoming Finance Director and participating in an employee share scheme. The claimant’s prolonged failure to record or pursue the alleged agreement also supported the conclusion that no binding agreement was understood at the time.

5. In any event, the claimant had not proved that his work caused the share price to reach £8, or even made a substantial contribution to that result. No expert or other evidence permitted that inference.

not stated in the judgment.