23rd February 2023
The Supreme Court’s decision in Barton v Morris  emphasises the risks of entering into oral contracts and the value in properly documenting commercial arrangements. Walker Morris commented recently on the dangers associated with informal contracting. In this follow up article, Louise Norbury-Robinson, Jack Heward and Jake Phillips explain legal and practical lessons arising from the latest Supreme Court authority.
Mr Barton and a representative of Foxpace Limited had discussed a proposal that if Barton introduced a buyer who would purchase Foxpace’s property, Nash House, for £6.5 million, Foxpace would pay introductory fees of £1.2 million. No account was made of the potential for a sale at less than £6.5 million. When, following an introduction by Mr Barton, a buyer purchased Nash House for £6 million, a dispute arose as to the existence, terms and enforceability of the alleged oral contract for introductory fees.
In the absence of an oral contract, the Supreme Court considered the possible ways in which Foxpace could be contractually bound to pay an introductory fee to Mr Barton:
By a majority decision, the Supreme Court found that Mr Barton wasn’t entitled to any commission. The oral contract failed to account for the circumstances that arose. The court could not imply any term to cover Nash House being sold for less than £6.5million. It’s a common misconception between commercial parties that the law of unjust enrichment can resolve deficiencies in oral contracts or in poorly constructed written contracts.
This case provides further clarity on implying terms into oral contracts or contracts generally. It’s particularly helpful in the context of introductory fees and estate agency commission. The case also highlights the fact that doing business solely on the basis of oral contracts can be a costly mistake.
Parties can ensure better mutual understanding and cooperation where fundamental terms are committed to writing. Sometimes the mere process of recording an arrangement in writing – never mind instructing a specialist solicitor – immediately prompts the necessary questions: have we covered everything; what if this or that happens; who should pay for what and when; etc.
Key starting points to consider and iron out with the counter-party include:
In addition, before undertaking any work, supplying any goods or services or incurring any significant expenses or obligations, any business or person involved in discussions concerning potential commercial arrangements should:
In the vast majority of commercial cases, the best advice will be not to start work, invest any significant time or money, or otherwise proceed with a venture, until a formal written contract has been completed. Recording oral agreements in writing can significantly lessen the chances of a dispute. If/when any dispute does arise, perhaps in relation to the parties’ differing interpretations of the written contract or where a contract otherwise somehow falls short, the written contract and any correspondence or file connected with the contractual negotiations and drafting can constitute valuable evidence to aid resolution.
Informal/pre-contractual communications and negotiations can be a minefield. Walker Morris’ Commercial and Commercial Dispute Resolution specialists understand that it’s crucial for a business to get the balance right between being able to quickly obtain sufficient comfort to enable parties to proceed with their plans, and acquiring reliable, written contractual protection. An awareness of key contractual principles, and the practical scenarios in which risks in relation to oral contracts and informality may arise for any particular business, is essential.
For further information or staff training in relation to pre-contract traps and tips; for assistance in relation to effective commercial contract drafting; or for strategic advice if and when any informal negotiations or oral contracts do result in issues or disputes, please contact Louise Norbury-Robinson, Jack Heward 0r Jake Phillips. They, or any member of the Commercial and Commercial Dispute Resolution teams, will be very happy to help.
 Barton and others (Respondents) v Morris and another in place of Gwyn–Jones (deceased) (Appellants)  UKSC 3
 In an earlier briefing we considered the case of Wells v Devani, another Supreme Court case on implying terms into oral contracts, also in the context of introductory fees. In Barton v Morris, the Supreme Court has effectively distinguished Wells v Devani because Mr Barton was not an estate agent. Together, these two Supreme Court decisions, arising from similar facts but reaching two different conclusions, highlight the uncertainty and ‘litigation risk’ always associated with seeking to enforce alleged oral contracts
 See our previous article for more information and advice on unjust enrichment