There has been a particularly interesting case unfolding recently in London's High Court, in which Newcastle United and Sports Direct owner, Mike Ashley, is being sued by his former business associate and finance expert, Jeff Blue, for supposedly breaching a verbal contract made during a boozy pub session in January 2013.
Blue claims he was promised £15 million by billionaire Ashley if, using his expertise and services, he was able to double Sports Direct's share price to £8 per share within three years.
When the shares did hit £8 within said time-frame, Ashley dismissed Blue’s claims for £15 million as drink-fuelled "banter", and not a serious attempt to enter a legal agreement. Blue did receive £1 million from Ashley but for unrelated work to that in question, according to reports.
While Ashley doesn’t dispute that the conversation took place, he argues that he was too intoxicated for it to be a serious arrangement. This highlights that it is still good to bear in mind where you stand with a verbal agreement and just how legally binding they can be.
While they are very much a part of everyday life, a verbal agreement regarding the trade or servicing of a multi-million-euro asset like a superyacht, for instance, is significantly more precarious than an agreement with the local barber for a pompadour fade.
With a verbal agreement, there must be an offer and acceptance with mutual consent and understanding, which means that both parties are cognizant about what they are agreeing to and the terms of the contract. There must also be good faith, where parties are not entering into a verbal agreement to cheat each other or break the law.
Verbal agreements can be enforced lawfully and upheld in court if a party decides to breach the agreement. In many ways, they are as legally binding as a written contract. However, of course, they are very difficult to prove if one party seeks to renege on the agreement and deny any such conversations ever took place.
As an example of how this can relate to our industry: if a superyacht broker were to negotiate a commission, or other form of bonus, with an owner for his/her services without it being bound by written documentation, if the owner were to later revoke the commission or bonus upon fulfilment of the broker’s services, how easy would it then be for the broker to prove what was agreed?
I do not think I am misguided in thinking that a level of unsullied decorum is not always present when the numbers get big and scary, so it is certainly worth considering a written contract when any doubts present themselves, as Ashley’s case is proving.
Image courtesy of BBC.