Blue v Ashley (Rev 1)

An oral promise creates contractual liability only where, viewed objectively in its context, it expresses a serious willingness to be bound and satisfies the other requirements of a contract. Informality and alcohol do not prevent contract formation. However, the occasion’s purpose, jocular language, commercial implausibility and vague terms may show that no binding agreement was intended.

For oral dealings, subjective understandings and subsequent conduct are admissible as evidence of the communications’ objective meaning. They do not replace the objective test. Courts seek to uphold agreements intended to bind, but an essential time limit cannot be supplied through a reasonable-time term where there is no objective yardstick for determining it.

Jeffrey Blue, an investment banking consultant providing services to Sports Direct through his firm, claimed £14 million from Michael Ashley, the company’s founder and majority shareholder. The claim arose from a conversation in a public house during an informal meeting with three representatives of a prospective corporate broker. Blue alleged that Ashley had agreed to pay him £15 million if he could get Sports Direct’s share price to £8 within three years.

The share price subsequently reached £8. Ashley later paid Blue £1 million, which Blue characterised as an instalment acknowledging the agreement. Ashley maintained that the conversation was banter, that its terms lacked sufficient certainty and that Blue could not establish that his work caused the share price to reach the target. Following a trial, the court had to determine what was said, whether it created a binding contract and, if so, whether the payment condition had been fulfilled.

1. The claim was dismissed. Although Ashley had said that he would pay Blue £15 million if Blue could get the share price to £8, no reasonable person present would have understood this as a serious contractual offer. Neither the participants nor Blue himself understood it that way at the time. The setting, purpose, jocular tone, commercial implausibility, incongruity with Blue’s role, vagueness and participants’ perceptions supported that conclusion (paras [79]–[107], [132], [142]).

2. A contract could generally be made orally without formality. Its formation nevertheless required agreement, an intention to create legal relations, consideration and sufficiently certain and complete terms. The objective inquiry concerned the communicated words and conduct, understood in their shared factual context: RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH and Co KG [2010] UKSC 14 applied. A pub setting and alcohol were relevant circumstances rather than automatic barriers to formation (paras [49], [52]–[63], [81]).

3. In assessing oral dealings, subjective understandings and subsequent conduct were admissible insofar as they illuminated the communications’ objective meaning: Carmichael v National Power Plc [1999] 1 WLR 2042 applied. The same reasoning extended to other participants’ understandings. Recollections required caution, having regard to memory’s malleability, litigation’s effects and contemporaneous evidence. The later conversations and £1 million payment did not establish an original contractual intention; the payment was more plausibly connected with Blue’s anticipated appointment as finance director and participation in a share bonus scheme. The proposed adverse inferences from an absent witness and a non-party’s refusal to undertake a voluntary document search lacked the necessary foundation (paras [64]–[70], [99], [113]–[132]).

4. The court would strive to give sensible content to an agreement clearly intended to bind: Durham Tees Valley Airport v bmibaby [2010] EWCA Civ 485 applied. However, Blue had not proved an agreed period for achieving the target. There was no objective yardstick enabling a reasonable-time term to fill that essential gap. This provided an independently sufficient further reason why no enforceable contract arose; the other ambiguities primarily reinforced the absence of contractual intention (paras [61], [133]–[136]).

5. The consideration defence, which was not pursued at trial, was hopeless. Performance of an existing duty could provide a practical benefit, and the existing consultancy obligations were in any event between different legal persons. The court explained the effect of Williams v Roffey Bros & Nicholls (Contractors) Ltd [1999] 1 QB 1 (paras [58]–[60]).

6. The court declined to determine the meaning of the hypothetical payment condition. It nevertheless found that Blue had proved neither that his work caused the target to be reached nor that it substantially contributed to the doubling of the share price. General economic intuition could not establish that causal impact without evidence; expert evidence would have been needed to gauge it (paras [137]–[141]).

not stated in the judgment.