The High Court has rejected a company’s claim for commission for the introduction of a sports sponsorship opportunity on the basis that there was no binding contract between the parties. However, the company’s claim for unjust enrichment in respect of services provided in facilitating the sponsorship deal was allowed: AMP Advisory & Management Partners AG v Force India Formula One Team Limited[2019] EWHC 2426 (Comm).

The court rejected the claimant’s contention that there was an oral contract or, in the alternative, that the parties had entered into a contract on the terms of an unsigned mandate agreement. Viewed objectively, the verbal exchange between the parties was not intended to create legal relations, and the mandate agreement provided that it would “take effect upon signature”, but had never been signed. Whilst an unequivocal agreement to waive a requirement for a signed agreement can in principle be inferred from communications between the parties, in this case, the claimant’s repeated insistence for the mandate agreement to be signed showed that neither party had intended to waive that requirement.

As for the unjust enrichment claim, the evidence showed that a third party and not the claimant had introduced the sponsorship opportunity to the claimant. Therefore, the claimant could not claim a quantum meruit for introducing the sponsorship opportunity. Nevertheless, the court was satisfied that the claimant had made a contribution towards facilitating the sponsorship deal (albeit of a limited nature) and that the enrichment to the claimant in the form of the provision of those services was unjust. The court valued those services at £150,000 and awarded the claimant that sum.

The decision highlights the importance of ensuring that any agreement is clearly documented and signed so that there is no doubt that its terms are binding.

Tamsin Baird, a senior associate in our Disputes team, considers the decision further below.

Background

The defendant, a Formula One motor-racing team, entered into a major sponsorship agreement with an Austrian water company (BWT). The claimant, a sports marketing company, claimed to have introduced the sponsorship opportunity to the defendant and to have reached an agreement pursuant to which it would receive a percentage of the net receipts under the sponsorship agreement.

On 20 February 2017, the claimant’s representative, Mr Ramos, had lunch with the defendant’s team principal, Dr Mallya, at Dr Mallya’s home. There was a significant factual dispute as to what was said at this meeting. Whilst it was common ground that Mr Ramos referred to the potential sponsorship opportunity, Dr Mallya’s evidence was that he did not have any discussion about commission. Early the next day, Mr Ramos sent the defendant’s sporting director a copy of a mandate agreement setting out payment terms (the “Mandate Agreement”). The Mandate Agreement provided that if the defendant concluded a sponsorship agreement for the 2017 Formula One season with the (unnamed) sponsor, the defendant would pay a commission of 15% of the total net cash sponsorship fees up to €12.5 million and 12% on the sponsorship fees in excess of that amount. The Mandate Agreement provided that it would “take effect upon signature” but it was never executed.

Over the next few days, the claimant continued to have dealings with both BWT and the defendant. The sponsorship agreement between the defendant and BWT was entered into on 13 March 2017.

The claimant brought proceedings against the defendant seeking a percentage of the net receipts under the sponsorship agreement (which was worth around €74 million over its three year term). The claimant’s primary case was that the conversation on 20 February 2017 between Mr Ramos and Dr Mallya constituted a binding oral contract between the parties under which the defendant agreed to pay a reasonable commission to the claimant if the sponsorship agreement was concluded. In the alternative, the claimant relied on certain WhatsApp messages sent by the defendant’s commercial director to Mr Ramos to support its case that the parties had entered into a contract on the terms of the Mandate Agreement and had waived the requirement for that agreement to be signed. Finally, if there was no contract, the claimant claimed a quantum meruit on the basis that the defendant had been unjustly enriched through the provision of the services by the claimant.

Decision

Contractual claims

The High Court (Mrs Justice Moulder) rejected the claimant’s claim for a commission on the basis that there was no binding oral or written agreement between the parties. Moulder J noted the general principles to be applied in determining whether or not a contract has been concluded. The question was whether the parties’ words and conduct, when viewed objectively, led to a conclusion that they intended to create legal relations and had agreed all the essential terms for the formation of the contract. Evidence of the subjective understanding of the parties was admissible in so far as it tended to show whether objectively an agreement was reached. Evidence of the parties’ subsequent conduct could also be taken into account, as the court will have regard to the whole course of the negotiations.

In respect of the alleged oral agreement said to have been formed on 20 February 2017, Moulder J held that, based on her assessment of the evidence, it was likely that Dr Mallya did say words to the effect that he was fine with the principle of paying an introduction fee. However, when viewed objectively, the verbal exchange between Dr Mallya and Mr Ramos during the course of that lunch was not intended to be legally binding. Moulder J accepted the claimant’s submission that there was no reason why a legally binding contract could not be formed in an informal social setting. Nevertheless, she considered that the social nature of the meeting was a factor to take into account as was (more significantly) the fact that Dr Mallya knew that Mr Ramos had no prior experience or track record as a sponsorship agent.

Further, Moulder J held that the subsequent email and WhatsApp exchanges between the parties did not support the inference that a binding oral agreement had been reached. In particular, the sending of the draft Mandate Agreement to the defendant and the repeated requests for it to be signed suggested that the parties did not intend to be bound by their oral statements. There was no indication in subsequent communications that the Mandate Agreement was simply to give effect to the oral agreement. In view of the above, Moulder J found that no binding contract to pay a commission was formed orally at 20 February meeting.

In respect of the claimant’s alternative case, Moulder J held that the parties did not enter into a binding contract on the terms of the Mandate Agreement. She considered the specific WhatsApp messages relied upon by the claimant against the background context in which they were sent and she also had regard to the subsequent communications between the parties. She found that the words used in the WhatsApp messages would not be understood by a reasonable person to indicate that the parties had intended to create legal relations.

Moulder J rejected the claimant’s submission that, given the need for the sponsorship deal to be concluded exceptionally quickly in advance of the start of the 2017 Formula One season, the parties had agreed to press ahead on the terms of the Mandate Agreement and had agreed to waive the requirement for the Mandate Agreement to be signed. She confirmed that an unequivocal agreement to waive a requirement for a signed agreement can in principle be inferred from communications between the parties. However, in this case, the evidence showed that there was no such unequivocal waiver. Instead, the repeated insistence for the agreement to be signed supported an inference that neither party had waived that requirement.

Unjust enrichment claim

Moulder J allowed the claimant’s claim for unjust enrichment in part. Following a lengthy assessment of the evidence, she concluded that a third party and not the claimant had introduced the sponsorship opportunity to the claimant. Therefore, the claimant could not claim a quantum meruit based on unjust enrichment for introducing the sponsorship opportunity.

Nevertheless, Moulder J was satisfied that the claimant had made a contribution towards facilitating the sponsorship deal (albeit of a limited nature) and that the provision of these services constituted an enrichment of the defendant at the expense of the claimant. In considering whether such enrichment was unjust, Moulder J applied the principles set out in MSM Consulting Ltd v United Republic of Tanzania [2009] EWHC 121 (QB), which considered the circumstances in which the court would impose an obligation to pay for services provided in anticipation of a contract that did not materialise. She held that the services provided by the claimant were not of a kind which would normally be given free of charge. Further, the defendant knew that the services were not intended by the claimant to be given freely. Finally, whilst the claimant sought from the outset to have a signed agreement, this was not a case where the claimant took the risk that it would only be compensated if there was a concluded contract. She held that the claimant provided the services in circumstances where it was led to understand by the defendant that it would be compensated. In the circumstances, Moulder J held that the enrichment in the form of the provision of the services was unjust and the defendant was obliged to pay for the benefit it derived from those services.

The test to be applied in assessing the value of the benefit received by the defendant was the objective market price for those services. On the basis of the limited valuation evidence before the court, Moulder J found that the objective value of the benefit of the services provided by the claimant to the defendant was £150,000.

Comment

The decision highlights the importance of ensuring that any agreement is clearly documented and signed so that there is no doubt that its terms are binding. A party seeking to rely on an oral contract will always face uncertainty, particularly in light of what Moulder J referred to as “the unreliability of the human memory”. It was clear that she found much of the witness evidence in the case to be of limited assistance. Instead, she placed weight on the contemporaneous documentary evidence.

The decision also highlights the importance of subsequent communications between the parties when seeking to establish an earlier binding contract entered into orally or in correspondence. Parties should ensure that any such communications reflect and confirm the earlier agreement. In particular, if providing a formal contract for signature in these circumstances, it should be made clear that its purpose is merely to give effect to the earlier binding agreement.

Finally, the decision serves as a reminder that even where no contract is found to exist, this does not mean that no legal rights have been created. In this case, the claimant’s unjust enrichment claim was a hollow victory as it was awarded only a fraction of the value of its commission claim (circa €9 million). However, had the claimant been able to prove that it was responsible for the introduction of the sponsorship opportunity, an award of quantum meruit on the basis of unjust enrichment may well have been similar to the value of its commission claim.