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Is a verbal contract a valid contract?

30th May 2018 by Rob Kelly

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When parties make an oral agreement but fail to record it in writing it can be very difficult, or even impossible, for the court to ascertain whether a meeting of minds has occurred.

A recent case involving classic cars highlights the difficulty.

In Michael Tuke v JD Classics Ltd, the claimant, a wealthy businessman who had an interest in classic cars, brought a claim against a classic car dealer and restorer on the basis that the dealer was acting as his agent in the purchase, restoration and sale of high-value classic cars.  He alleged that at a meeting in December 2009 the dealer had told him that classic cars are “better than banks” and that he “could double his money”.  Mr Tuke alleged that during this meeting, the dealer agreed to source cars for Mr Tuke to purchase, undertake servicing, maintenance and restoration and then find potential buyers, all for a 10% commission on any profits.

Mr Tuke spent almost £40m on 19 classic vehicles over a period of about 4 years.  However, he did not make the sort of profits that he thought the dealer had promised and in 2016 he requested the dealer to deliver to him all documents relating to the 19 cars which had been sold.  The dealer declined to do so on the basis that no agency relationship existed.  He argued that he had been working on his own account throughout and that the claimant had misunderstood the nature of the agreement.

These facts emerged at a preliminary hearing at which the dealer tried to strike out the claim but in rejecting the dealer’s application, leaving the way open for a full trial, the court found that the claimant had established at least a realistic prospect that his claim would prevail due to emails and other communications passing between the parties which were consistent with an agency agreement.

This case illustrates the importance of establishing what the relationship is, and confirming it in writing. Oral contracts can be just as enforceable as written contracts but without a written record of what has been agreed or, preferably, a formal and comprehensive written agreement, it may be very difficult or impossible to prove the claim to the necessary standard for a court.

If you would like further information please contact Rob Kelly.

This article provides information and comments on legal issues and developments of interest.  The contents of this article do not constitute legal advice, is not a comprehensive treatment of the subject matter covered, and should not be relied on as such.  Legal advice should be sought about your specific circumstances before taking any action with respect to the matters discussed.
Questions relating to this article should be addressed directly to the author.

Rob Kelly

Associate — Dispute Resolution

Direct dial: 01202 755217

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Rob is an Associate Member of the Chartered Institute of Legal Executives (September 2009).  Rob also holds an LLB (Hons) degree in law.  He successfully completed training as a mediator under the ADR Chambers / Harvard Law Project Scheme and was one of the first mediators to have been appointed an IMI Certified Mediation Advocate in the UK with a commercial practice.

Rob specialises in dispute resolution through litigation, arbitration and mediation, with particular emphasis on contractual disputes, claims involving allegations of professional negligence (which he has prosecuted on behalf of commercial and private clients and defended on behalf of insurers, re-insurers and Lloyd’s syndicates). He is regularly instructed in connection with substantial disputes involving contractual, professional negligence, contentious probate issues.  Rob also deals with contentious property and landlord and tenant issues.

Rob’s style is a mix of listening, asking (tough) questions, diplomacy and reality testing. He’s interested, flexible, and pragmatic. He offers a common sense, realistic approach to assist his clients in searching for solutions to their disputes and brings straight talking and integrity to his work.

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