Are oral job offers binding?

Posted: 3rd July 2019

Handshake 3Those intent on changing jobs can have their heads turned by offers of remuneration and benefits made over lunch and a handshake. However, as one case showed, it is written terms of engagement that matter, and taking advice is the best way of avoiding disappointment.

The case concerned two very experienced finance professionals who were recruited as members of a broking partnership. They claimed that a lunch date with a senior representative of the firm ended with a handshake after various generous terms were offered, including signing-on fees of £100,000, six-figure salaries, guaranteed profit shares and expenses and client entertainment allowances.

When the terms of their membership were reduced to writing, however, they were far less extravagant. Amongst other things, their signing-on fees were in the form of loans, forgivable after four years’ service, and there were no expenses allowances. As self-employed members of the firm, they would receive no salaries and their earnings would be largely performance-related.

The disconnect between the restaurant conversation and the documents that they in fact signed was not conducive to a happy working relationship. Their time with the firm was extremely fractious and they walked out little more than a year after they were taken on. After they were removed from the firm’s membership, they launched proceedings, seeking payment of six-figure sums they claimed they should have received, and damages to reflect their financial losses.

In dismissing their claims, however, the court rejected arguments that the firm had acted in repudiatory breach of their contracts. Their decision to walk out, which was founded on a fundamental misunderstanding of their contractual entitlements, was precipitate and extremely ill-advised. The firm had been faced with two of its members refusing to perform their contracts and, in those circumstances, the termination of their membership, on terms which were very unfavourable to them, was in accordance with the provisions of the partnership deed.