The Court has considered whether a discussion between two businessmen over a meal in a restaurant can create a legally binding contract.
Anyone with a rudimentary understanding of contract law will remember the basic principles of: offer, acceptance, consideration, certainty of terms and an intention to create legal relations.
It is the latter of these requirements which the Court considered in the case of MacInnes v Gross.
Over dinner, Mr MacInnes and Mr Gross discussed a proposal whereby Mr MacInnes would leave his employment as an investment banker and work for Mr Gross in connection with the sale of Mr Gross’ business. It was proposed that Mr MacInnes would be paid by reference to the difference between the target sale price and the actual sale price.
Following the discussion, Mr MacInnes sent and email to Mr Gross setting out the “headline terms” of the agreement.
Several months later, when the sale of the business started progressing, Mr MacInnes sent a further email emphasising the importance of the parties being “completely aligned”. Mr Gross replied by stating they needed to make a “proper contract”.
Following completion of the sale, Mr MacInnes claimed for payment.
HELD: The Court found that the language used in the emails did not support Mr MacInnes’ contention that there was a legally binding contract. The reference to “headline terms” indicated that – at that time – there was no intention to create legal relations, only the basis of a possible future agreement.
Further, Mr MacInnes’ second email supported the conclusion that he did not believe there was a legally binding agreement yet in place. This was supported by Mr Gross’ email which he contended was evidence that no agreement had been reached.
In any event, the Court concluded that the terms were too uncertain to be enforceable. The claim therefore failed.
COMMENT: Although this decision does not create any new law, it is a useful reminder of the basis of contract formation. Whilst there is nothing to prevent a legally binding contract being concluded in a restaurant, the informal setting would mean that the context would require close examination to ascertain an intention to create legal relations.