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Limitations of the Spoken Word as a Contractual Tool

The spoken word inevitably leaves room for misunderstanding and differences of recollection and is far from an ideal medium for the making of contracts. The point was made by a High Court case that focused on a hotly disputed conversation between an investment banker and his boss.

The banker claimed that his employer’s CEO had promised him what was referred to as a ‘retention award’ worth £1 million. Based on their conversation, he alleged that a binding contract had been created. For its part, the employer robustly asserted that no contractual agreement had been reached.

Ruling on the dispute, the Court could place little reliance on the recollections of the two participants in the conversation. Based on documentary evidence, however, it found that the CEO did no more than float the possibility of the banker receiving a seven-figure sum. All he did was indicate that the banker might receive jam tomorrow.

Whilst keen to retain the banker’s services, what the CEO said lacked the certainty required to create a contract and he had not intended to create legal relations. It was objectively apparent that the retention award was subject to further confirmation, consideration or approval by the employer’s remuneration committee or its parent company.

The CEO made no sufficiently clear representations that the retention award would be paid. Even if he had done, he had not intended the banker to rely upon such representations to his detriment and the latter had not in fact so relied. The banker’s claim in respect of the retention award was dismissed.

Published in
22 May 2022
Last Updated
15 November 2022