Consultant fails to convince court over oral contract

The risk involved in relying on oral contracts was illustrated in a recent case before the High Court.

It involved a property consultant who specialised in finding work for development companies in return for a share of the profits. Most of his work was carried out through his own limited company on the basis that he would receive 25% of the profits and take 25% of the risk if the project made a loss.

In addition to this he occasionally carried out work as an individual for which payment was negotiated on an individual basis. While working as an individual he helped a developer become involved in the refurbishment of St Pancras Station.

The consultant had no further involvement in the deal, which later grew into the largest and most lucrative project the developer had ever undertaken.

The consultant sought a 25% share of the profits on the basis of an alleged oral agreement in keeping with his usual terms. However, the developer denied there had been any agreement as the consultant had been working as an individual rather than through his limited company.

The court found in favour of the developer saying there was no evidence of any oral agreement. The consultant had not mentioned it in letters to the developer at the time, which was out of character for him.

The consultant also failed in his alternative claim that he should be paid for what his work had been worth. The court held that the project had developed into something very different to the one the consultant had first envisaged and the circumstances had changed.

He had failed to show that he had expected to be paid for introducing the developer to the project and that the developer was aware of his expectation. He had therefore failed to show that he was entitled to payment.

Please contact Neil O’Callaghan about the issues raised in this article or any aspect of contract litigation.