The High Court has held in the case of MacInnes v Gross  that a discussion between businessmen over dinner in a restaurant did not amount to an intention to establish legal relations.
The High Court decided that an informal discussion and subsequent exchange of emails concerning a proposed business arrangement did not evidence an intention to create legal relations. It was clear from the language used in the emails that the parties did not consider themselves contractually bound. In any event, the terms of the alleged contract were so unclear as to prevent a binding contract from coming into existence.
The claimant sought payment of EUR13.5 million pursuant to an alleged contract with the defendant.
The key meeting between the parties had taken place over dinner in a restaurant. According to the claimant, the parties agreed at that meeting that the claimant would leave his employment with an investment bank and would personally provide services to the defendant with the aim of maximising the defendant’s return on the sale of his business. The claimant maintained that the parties agreed that he would receive a sum calculated by reference to the amount of the difference between the actual sale price of the business and the target price. The following day, the claimant emailed the defendant setting out what he considered to be an agreement “on headline terms” between the parties.
Some nine months later, when a possible sale began to materialise, the claimant emailed the defendant, forwarding his earlier email and stating that it was important that the parties were “completely aligned”. The defendant replied that they needed to make a “proper contract”. After the sale of the business, the claimant demanded payment for his services, relying on the alleged contract between the parties.
The court dismissed the claim on 2 grounds:
- Although it was possible for a binding contract to come into existence over dinner in a restaurant, the highly informal setting required close scrutiny of whether there was in fact an intention to create legal relations. The claimant’s use of the words “on headline terms” was strongly indicative that, at least at that point in time, there was no intention to create legal relations. Rather, it suggested that matters remained to be finalised, by preparation of a formal contract. This conclusion was demonstrated by the claimant’s second email which indicated that the claimant did not himself believe that there was a binding agreement between the parties. The best that could be said was that there was a basis for a future agreement. The defendant’s reply showed that the defendant did not consider an agreement to have been reached. Accordingly, there was no intention to create legal relations and, therefore, no binding contract.
- The court also held that in any event, the terms of the alleged contract were both too complex and too uncertain to be enforceable. The claimant’s first email, which was the only record of the matters discussed at the dinner, made no reference to the sale of the business or to the proceeds of sale and a reasonable observer would have been unable to determine how any remuneration would be payable to the claimant. The nature of the services to be provided was unclear.
A contract cannot be made without intention to create a legally binding arrangement. This case serves as a useful reminder that written contractual agreements are essential to ensure certainty and enforceability of terms which parties believe have been agreed between them.
For a binding contract to exist, and to be enforced, the terms must be certain. Parties must ensure that:
- Their agreement is complete, that is, not lacking in some essential term.
- The agreement is not otherwise uncertain, for example, vague or ambiguous.
Farleys Solicitors have a team of dedicated commercial litigation professionals who can provide legal advice if you are in a dispute regarding contracts or business negotiations. Please call 0845 287 0939 to speak about your legal issues today or complete our online contact form and we will get in touch with you.