24th October 2018
A recent dispute between long-standing business associates and friends has highlighted the risks that can arise with informal contracts, settlement, variations and part-payments. Walker Morris’ Head of Commercial Dispute Resolution, Gwendoline Davies, offers her top tips for avoiding these common contractual traps for the unwary.
Mr Simantob and Mr Shavleyan  had a long history of family, community and business ties, both having expertise and trading in antique Islamic, Persian and Turkish textiles. When a number of claims arising out of their various business arrangements arose, Mr Simantob and Mr Shavleyan chose to resolve matters informally between themselves. (Whilst the particular products and industry here are relatively specialised, the close relationship between the parties is common in many commercial cases.)
They entered into a settlement agreement and when Mr Shavleyan defaulted, another informal arrangement was reached between them. The latter involved payment of monthly instalments. Unfortunately, after Mr Shavleyan had made, and Mr Simantob had accepted, several instalment payments, a dispute as to the nature of the latter arrangement arose. Mr Shavleyan contended that the instalment arrangement had varied the original settlement agreement, reducing his full and final liability to a lesser sum; but Mr Simantob argued that it was merely a plan for payments to be made periodically on account of Mr Shavleyan’s liability for the full sum due under the original settlement agreement.
Purely on the particular facts, the High Court found that the instalment arrangement had varied the settlement agreement such that Mr Shavleyan had become liable only for the lesser sum. Legally speaking, however, the case could have gone either way.
The case therefore highlights a number of issues of which all businesses should be aware:
Remember the old adage: a stitch in time saves nine. In attempting to avoid legal proceedings, Mr Simantob and Mr Shavleyan got themselves repeatedly tangled in legal knots – and of course they ended up having to resolve the matter via litigation in the end anyway. Taking the time to seek specialist advice, and to document business arrangements in formal, written contracts, can minimise the scope for dispute.
If you would like any further information or advice about these or any other commercial contract or dispute resolution issues, please do not hesitate to contact Gwendoline Davies or any member of the Commercial Dispute Resolution Team.
  EWHC 2005
 Subject, potentially, to the existence and terms of any anti-variation provisions and/or the doctrine of estoppel – see our related briefing for further information
 which can be construed quite widely and could, for example and non-exhaustively, include some expectation of commercial advantage or some element of compromise or the minimising of a risk
 That is what happened in Simantob v Shavleyan: due to both the nature of the parties’ interrelated business and personal lives and to legal uncertainties within their informal commercial arrangements, the High Court held that the instalment payment arrangement represented a compromise to both parties and that there was therefore an element of additional benefit for Mr Simantob