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Sensible Businesspeople Never Contract Without Legal Advice

It is a frequent occurrence that two businesspeople who attend the same meeting emerge with diametrically opposed views as to what, if anything, has been agreed. A High Court case concerning the sale of a luxury overseas property development showed exactly why legal representation and formal documentation matter.

The development of villas and townhouses was hampered by delays, cost overruns and other difficulties. The businessman behind the venture was under great financial pressure, not least from a man who had financed the project and, through his company, was seeking possession of the development.

The businessman alleged that, during a meeting with the lender at the latter’s home, they had reached an immediate and binding oral contract concerning the sale of the development’s units and the division of the proceeds. The lender was also said to have agreed to defer the possession proceedings in order to allow time for the units to be marketed and sold. The businessman claimed damages from the lender on the basis that he had suffered losses of about $6.8 million due to the latter’s breach of the agreement.

The lender, however, gave a very different account of the meeting. He said that its purpose was to discuss an offer made by the businessman and that it only lasted about an hour. He asserted that he had made it clear at the outset that he reserved his rights, that the meeting was without prejudice and that he would enter no agreement without legal advice.

Rejecting the businessman’s claim, the Court commented adversely on his reliability as a witness and his tendency to make self-serving statements to bolster his case. Although the two men may have reached an understanding by the end of the meeting, it was clear from the surrounding correspondence that neither of them understood that it had the effect of creating a binding contract.

Published in
21 January 2021
Last Updated
9 March 2021