Williams (as executor of the estate of Batters deceased) v Jones (2014)
This decision of the High Court illustrates that contracts do not necessarily have to be in writing to be binding.
The claimant (Ms Williams), as executrix of the estate of the deceased, Mr Batters, claimed damages from the defendant, Mr Jones, for failing to perform an oral agreement. Ms Williams’ case was that Messrs Batters and Jones had entered into an oral agreement under which Mr Jones agreed to arrange the purchase of Mr Batters’ shareholding in a company. Mr Batters died, and Mr Jones never completed the share purchase transaction. A formal written agreement had been drawn up, but Mr Batters died before executing it. Ms Williams claimed that the written agreement had been intended merely as a record of Batters’ and Jones’ complete and binding oral agreement. Although there was no express stipulation that everything was subject to contract, Mr Jones claimed that such a condition was implied and as such, countered that there was no binding agreement.
The High Court found that there was in fact a complete and binding agreement before Mr Batters died. By 12 August 2008, the only matters outstanding between Messrs Batters and Jones were the question of accountancy advice, the identity of the purchaser and the production and execution of a formal written document. There was, by that date, an agreement which was sufficiently certain to be enforced by a court and had Mr Jones repudiated it, Mr Batters could have obtained an order for specific performance. By 2 September, the contemplated accountancy advice had been obtained, a purchaser had been identified and the structure for the share purchase had been agreed. Tax clearance was obtained on 23 September. The documentation, in its final form and ready for signature, was in Mr Jones’ hands by 24 October, by which point there were no terms that were still to be agreed.
Mr Jones’ argument that the agreement was subject to contract failed because documentation could be intended merely to be a record of what had already been agreed. The Court observed that: “Whilst it might have been imprudent for both parties to enter into an informal binding agreement for the sale of the shares (and therefore not likely to be what was intended) if this had been an arms-length transaction between “strangers”, this was not such a case. They were very good friends, who, no doubt, trusted each other entirely. There was no need for “due diligence” or any vendor’s warranties.”
Mr Jones never suggested to Mr Batters that their agreement was not binding and he made no such suggestion to Ms Williams until March 2010. The circumstances clearly pointed to the conclusion that the agreement was not subject to contract but complete and was of immediate and binding effect when it was concluded.