A cautionary tale for dealmakers: do you really want to work for free?

The facts

Whether an introduction was made was not in dispute here, instead the issue was the specific terms of the introduction agreement.  Foxpace, (in this case, the Fourth Respondent), claimed that payment was only due if Mr Barton introduced a buyer who agreed to pay £6.5m (specifically) for Nash House.

Despite the introduced buyer initially agreeing to pay £6.55m, for various reasons, it ended up ultimately only paying £6m plus VAT. Foxpace therefore argued it didn’t owe Mr Barton anything as the property had not been sold for £6.5m. There was a further complication in that the introduction agreement itself was purely oral, and nothing had been discussed about what would happen if an introduced buyer paid anything less than £6.5m.

The question before the court was whether Mr Barton was owed anything at all for his reasonable services?

The decision

At first instance, the trial judge held that Mr Barton was not entitled to any payment. Mr Barton appealed, and the Court of Appeal held that he was entitled to a ‘reasonable fee’ of £435,000. This decision too was appealed, which brought it before the Supreme Court to decide.

A majority of 3:2 of the Supreme Court held that Mr Barton was not entitled to anything. In reaching this decision, they considered:

1. the express terms of the contract – the judges held the only obligation was for Foxpace to pay Mr Barton £1.2m if the property sold for at least £6.5m. There was no express obligation to pay Mr Barton a fee if the property sold for less.
2. whether a term had been implied as a matter of fact – here it was held that implying such a term would contradict the express obligation that was actually agreed.
3. whether a term was implied as a matter of law – the Supreme Court held that the Sales of Goods and Services Act 1982 should not be implied here.

Mr Barton’s unjust enrichment claim against Foxpace also failed. He therefore walked away with nothing.

Our commercial takeaways

We asked one of our Commercial law specialists, Craig Kelly, for his cautionary commercial takeaways from this case:

• A contract with ambiguous terms is always a concern.
• The contract in question clearly had terms which did not fit the purpose of what had been agreed between the parties.
• Although a contract does not have to be in writing to be enforceable, it is best practice to have the terms in writing as a reference point if litigation occurs.
• Before entering into a contract, both parties need to be comfortable that all details discussed are included in the agreement and they are aware of what they are entering into.
• Clear, concise and understandable terms are the most important aspects for a contract and there should be no hidden or obscure clauses to muddy the waters.

Unless you like working for free, how to get yourself paid should always be at the front of any commercial dealmaker’s mind.  It is critical to ensure your contractual terms are clear from the start and cover all eventualities. This case is yet another cautionary tale for anyone looking to cut a deal without working through how they will ultimately get paid.

Greenwoods has an excellent track record when it comes to enforcing contractual disputes for clients, even where things may seem to have gone wrong from the start. Our recent experience in proving the existence of oral contract terms in the reported Court of Appeal case of Johnson v Spooner and another is just one recent example of this. Click here if you need help drafting or negotiating a commercial agreement with our Corporate & Commercial team, or here to discuss a dispute with our Disputes team. 

[1] https://www.bailii.org/uk/cases/UKSC/2023/3.html