On 24 January 2013, at the Horse & Groom pub in Great Portland Street, Mike Ashley, of Sports Direct, and Jeffrey Blue, a consultant, made an “agreement”. It was, in substance, that, if Mr Blue could get the Sports Direct share price to £8 per share (within an unspecified time), Mr Ashley would pay him £15 million. But did what was said produce a binding contract? In answering that question, Mr Justice Leggatt provided a helpful reminder of the ingredients of a binding contract under English law. The parties must have reached an agreement, intended to be legally binding, supported by consideration, and sufficiently certain and complete to be enforceable. Subject to those requirements, it is possible to make an oral contract, but if there is no written record it is harder to prove. A contract can be made anywhere, in any circumstances, but was a binding contractual bonus arrangement made by Mr Ashley, during an evening of drinking with three investment bankers, with a consultant who was meeting them on behalf of Sports Direct?

The judge said not, for eight main reasons. The meeting was an unlikely setting to negotiate a bonus arrangement with Mr Blue; its purpose was to enable Mr Ashley to meet the bankers. The nature and tone of the conversation was inconsistent with Mr Blue’s claim; everyone was laughing throughout and no one could reasonably have understood it to be a serious business discussion. Mr Ashley had no commercial reason to offer to pay Mr Blue £15 million as an incentive to do work aimed at increasing the Sports Direct share price. A contract made on the terms discussed would have been inherently absurd. The “offer” was far too vague to have been seriously meant, none of the three bankers involved in the conversation thought that Mr Ashley was being serious and, at the time, nor did Mr Blue himself.

And, in the judge’s view, it was improbable that a person with as much business experience as Mr Blue, had he truly believed the conversation, would have thought it unnecessary to make any written record of what had been agreed. It was even more improbable, indeed wholly incredible, that, if Mr Blue had believed there to be a binding oral agreement, he would have waited nearly a year before mentioning what had been said in the Horse & Groom to Mr Ashley. The fact that Mr Blue had since convinced himself that the offer was a serious one, and that a legally binding agreement was made, showed only that the human capacity for wishful thinking knows few bounds.

Blue v Ashley (Rev 1) [2017] EWHC 1928 (Comm)