Drafting Contracts: Key Lessons From 2019

In this briefing we look at the lessons to be learnt from some of the English contract law cases of 2019. Whilst the cases we cover do not involve any seismic shift in the law, they do serve as a useful reminder to those entering into contracts of some legal pitfalls to be wary of. We also flag the discontinuance of LIBOR and the impact of Brexit on contracts.

1. Formation and certainty of terms

Do you have a contract? Every year a multitude of cases are brought to court which centre around the basic question of whether a contract was ever actually formed. Even if it is possible to identify an offer and acceptance, if its terms are unclear it may not be binding on the parties. The cases we have selected below highlight the importance of being clear as to when a contract has been formed and what its terms are, particularly when one party has started performing its obligations.

Farrar v Rylatt [2019] EWCA Civ 1864

In 2017 Mr Farrar sought a declaration from the court that the profit share agreements were binding. The judge at first instance and the Court of Appeal rejected Mr Farrar's claim and any right to profits.

In relation to Hazel Grove the evidence showed a "confusing picture" as to between who and when any oral agreement was made. Further it was considered extremely unlikely that the Rylatts understood the meaning of putting a trust over Hazel Grove. In relation to The Barns' heads of terms, Mr Farrar argued that at the time there was nothing left to agree in respect of the profit share arrangement and the "Subject to Contract" tag should have been ignored because the parties had intended to create legal relations. This argument failed on the basis that the heads of terms contained a clause that envisaged a joint venture partnership, which never materialised. Importantly, the "Subject to Contract" wording also featured on the face of the document and was therefore considered to cover all terms as it had not been expressly dissapplied from any specific clauses.

Anchor 2020 Limited v Midas Construction Limited [2019] EWHC 435 (TCC)

Anchor engaged Midas to design and build a retirement community in Hampshire. The parties were not able to agree all the terms before the construction start date so Anchor issued several letters of intent pending finalisation of the formal contract. The contract sum was agreed between the parties and documented in one of the letters of intent. Midas returned a signed version of the formal contract to Anchor...