Absence of a professionally drafted contract

Posted: 28th March 2018

Classic carThe trouble with oral agreements is that it can be near impossible to ascertain whether a genuine meeting of minds has been achieved.

In one case, a wealthy businessman and a classic car dealer disagreed as to the nature of their commercial relationship.

The businessman, who had recently sold his business, was looking for a good return on his capital. During a long and amiable meeting, he alleged that the dealer had told him that classic cars were better than banks and that he could double his money.

He spent almost £40 million on classic vehicles over a period of less than four years. However, after their relationship unravelled, the businessman sued the dealer’s company for about £9 million, alleging, amongst other things, fraudulent misrepresentation.

The businessman claimed that the deal struck at the meeting was a straightforward agency agreement, whereby the dealer had agreed to purchase cars on his behalf before selling them on, in return for a 10 per cent commission on profits.

The dealer, however, gave a very different account of what was said at the meeting. He argued that the businessman had misunderstood the nature of the agreement and that his claim was misconceived.

The dealer denied that it had been agreed that he would act as the businessman’s agent and argued that he had throughout the relationship been legitimately working on his own account. It was, he claimed, a simple profit-sharing arrangement, whereby vehicles would be sold and repurchased between the businessman and the company without any third party involvement.

The facts of the case emerged as the company applied to the High Court to strike out the businessman’s claim. However, in rejecting the application and opening the way for a full trial of the action, the Court found that the businessman had established at least a realistic prospect that his claim against the company would prevail.

Emails and other communications passing between him and the dealer were consistent with an agency agreement. The Court also granted leave for the businessman’s lawyers to cross-examine the dealer in connection with the fraudulent misrepresentation allegations.