Binding Agreement-part 1
There has been a recent hearing regarding Gabriel Heinze. He was a Manchester United footballer whose agent was given a letter (dated 13 June 2007) by the club's chief executive David Gill . That confirmed that United would listen to offers for the player if offered a sum of £6,800,000. United said that this did not mean that they were obliged to do a deal, Heinze said that they were. The particular bite to the dispute was that the club willing to offer the money were United’s traditional rivals Liverpool. United were not prepared to sell to them.
The dispute (which has subsequently been overtaken by events, with Heinze agreeing to move to Real Madrid) was resolved by the Premier League Board appointed panel. Heinze argued that once Liverpool matched the stated figure, he should be allowed to move there. The board disagreed. Firstly they took the view that the letter, taken in context of spoken discussions and United's transfer policy, plainly envisaged only an international transfer. Moreover the board considered that the letter constituted an 'agreement to agree'. It decided that the letter therefore created no binding obligation or agreement for United to transfer the player to any club offering the stated price. They thus took the view that this was merely evidence of an intention to negotiate, and not evidence of any intention to create legal relations. That meant that United could not be forced to sell him, hence his leaving for elsewhere.
Although we do not have the full text of the letter, some of the issues which this throws up are relevant when considering the contractual position between parties. The first point to consider relates to the spoken discussions. (The are popularly referred to as "verbal" discussions or agreements although that is a misnomer since agreements consisting of words are all verbal whether they are written or spoken: the proper legal term for anything agreed in spoken terms or stated in such terms is "oral", so if you read of an oral contract it means a contract which was not written, and if something is said to have been stated orally it means it was spoken not written). When contracts or documents are entered into then even if they are written what is spoken may have an impact.
For example if a party was asked to sign an agreement it might want some assurances from the other party. These might be assurances as to all types of things: a salesman assuring you that the kitchen you are in the process of ordering will be the same quality or material as the show room in the shop; someone assuring you that the contract can be signed and the money paid because the goods are already at their warehouse and have been paid for from the supplier; someone assuring you that certain other people known to you have purchased or used the same goods and services and have been satisfied with them. What people say at the time the document is provided can affect both the effect of the document and lead to potential claims against the person who has spoken the words. If there is a proposed order from a company and are concerned about the creditworthiness of the company, if someone at the company gives knowingly or negligently false information about that causing the other party to proceed with a deal to its disadvantage that might give rise to liability. That is personal liability upon them, quite apart from the position of the company.
In general terms therefore in any deal is important to bear in mind that even if the contract is in writing, statements made or assurances given orally can affect the enforceability or construction of the terms. They can also give rise to other potential rights of action against the person speaking the words.