Above And Beyond: When Express Terms Win
The nature of commercial contracts is such that challenging issues can easily arise where insufficient care is taken when discussing the terms to be agreed, particularly if a foreseeable event were to later occur.
An important case before the Supreme Court raised issues around the parties’ rights and obligations under an oral contract. (Lesson 1: confirm an oral agreement in a written contract).
What happened?
An individual, Philip Barton, verbally agreed with a limited company that if he introduced the company to a buyer of a property it owned, he would receive an introduction payment. Specifically, it was agreed that if the purchaser paid £6.5m for the property – Nash House in Mayfair, London – Barton would receive £1.2m.
There was no agreement in the event that the property sold for less than £6.5m – which is what happened in the event. The sale price was reduced to £6m after it emerged that the ability to develop the site could be affected by HS2.
A purchaser was introduced by Barton and the property sold for £6m (plus VAT). Unfortunately for Barton, the company refused to pay him for the introduction. He brought a claim for payment for the reasonable value of his services; the company defended the claim arguing that it had no contractual obligation to pay him anything.
Was there an implied term?
In essence, this was a basic question of contract law but its practical application is not always so clearcut. Clearly, there was no express term that Barton could rely on here.
At issue was whether the company was contractually bound to pay Barton a fee in the factual circumstances by way of an implied term. Terms can be – and often are - implied into a contract as a matter of fact or of law. It’s well known that the courts will only imply a term into a contract if it’s so obvious it goes without saying, or it’s necessary to give business efficacy to the contract.
The Supreme Court found that to imply a term entitling Barton to an unspecified payment if the property sold for a lower price contradicted the express terms. It was not necessary to imply a term to that effect in order to give the agreement business efficacy or coherence.
Furthermore, a term could not be implied in law by virtue of s15 of the Supply of Goods and Services Act 1982 as the contract provided expressly for payment on a sale in specific circumstances (ie where property sold for at least £6.5m). It was also arguable whether or not Barton was actually providing a service under the oral contract (if not, the 1982 Act would not apply).
What does this mean?
The outcome confirms that the court will not imply a term into a contract if it contradicts the express terms. That will be true whether or not the agreement is verbal or written.
Businesses should also consider the ‘what ifs’ where a fixed event fails to materialise – could the stated payment term fail completely, leaving one party at risk of having no remedy? The case serves as a salutary warning to consider the foreseeable eventualities.
Had Barton ensured his agreement with the seller had provided for payment where the sale was less than the stated price – he could have avoid lengthy and costly litigation.
1Barton v Morris [2023] UKSC 3
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