The importance of express terms in a contract

Two recent cases have highlighted the importance of getting your commercial contract terms right.

In Barton v Gwyn Jones, the Supreme Court had to decide, where there was no formal written agreement between the parties, whether the Claimant, Mr Barton, was entitled to payment for the reasonable value of his services where the contract did not expressly provide for such payment. In this case Mr Barton had an oral agreement that he would be paid £1.2m if he introduced a buyer for a property for a price of more than £6.5m. Papers were initially drawn up for the property transaction at a purchase price of £6.55m. Following complications, the price reduced to £6m +VAT. The oral contract made no provision for what would happen in these circumstances.

In Contra Holdings Limited v Mark Bamford which followed the judgment in Barton, the Court of Appeal considered whether an obligation had arisen to pay a success fee where there was a dispute about whether the express condition required to trigger the obligation had been met.

While fact specific, both cases highlight the importance of considering all the potential situations which may arise and then recording them clearly in the contract. That is because, as demonstrated in Barton and Contra Holdings, a court will be very reluctant to imply terms into a contract in circumstances where the contract expressly provides for payment on a narrow, specific outcome, but is silent if the outcome falls outside the express terms.

The cases also demonstrate the approach the courts are likely to take when a party attempts to rely on an implied term that is based on the surrounding facts, which appear to contradict the express wording of the contract.

If you require any assistance with drafting a contract or preparing terms of business, please contact Caroline Brennan, Partner in our Commercial team.

If you require any assistance with interpreting a contract or disputing its terms, please contact Daniel Adcock-Kirsh, Senior Associate in our Dispute Resolution team.