Insights

Andrew Robins

Published 27 March 2023
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The Dangers of Relying on Oral Contracts

A recent decision of the Supreme Court in the case of Barton v Morris is a reminder of the importance of entering into a properly documented contract rather than relying on oral contracts or informal agreements.

The facts of Barton v Morris

In the above case, Mr. Barton had a discussion with a representative of Foxpace Limited along the lines of agreeing that if Barton introduced a buyer who would purchase Foxpace’s property for £6.5 million, Foxpace would pay introductory fees of £1.2 million. The discussion did not make provision for what would happen if the property sold for less than £6.5 million.

Following an introduction by Mr. Barton, the property sold for £6 million and an issue arose about the payment of introductory fees.

The decision

The issues before the Supreme Court were how to interpret and enforce oral contracts.  The Supreme Court found that Mr. Barton was not entitled to any commission and the court refused to imply any term to provide payment in the event of a sale for less than £6.5 million.

The Supreme Court made the following findings:

  • There was no express contractual term which created an obligation to pay Mr. Barton a fee if the property was sold for less than £6.5 million.
  • To imply a term into the oral contract requiring Foxpace to pay Mr. Barton an unspecified sum if the property sold for less than £ 6.5 million would contradict the express term that payment would be due on a sale for £ 6.5 million.
  • There was no necessity to imply such a term to give the agreement business efficacy.
  • The Supply of Goods and Services Act 1982 which implies a term that the party contracting with the supplier will pay a reasonable charge where payment is not determined did not apply in this case as payment had been agreed by the oral contract. In any event, Mr. Barton was not an estate agent who could claim a customary commission. 
  • There were no grounds for a claim for unjust enrichment. The law of unjust enrichment is not here to resolve weaknesses in oral contracts. It was agreed that Foxpace would pay commission to Mr Barton on a sale for £6.5 million and there was nothing unjust in these circumstances. It was just a poor bargain.

Comment

The case highlights the risks involved when doing business on the basis of oral agreements, particularly in the context of introductory fees and estate agency commission.

The takeaway advice is that it is always better to enter into a properly considered agreement in writing, preferably with the benefit of legal advice on all key terms of the agreement. In particular, consideration should be given to the details of payment in different circumstances. Such written agreements should be in place before any work is undertaken.

For more information or to discuss the implications for you, please get in touch.

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