Chat = contract?

Date Added: 20 January 2012

A contract is formed when the four basic elements of offer, acceptance, consideration and intention to create legal relations are present. In BVM Management Ltd v Roger Yeomans t/a The Great Hall at Mains and another [2011] EWCA Civ 1254 The Court of Appeal has dismissed an appeal against a county court decision that an oral contract for a fixed two-year term contained an express term that it could be terminated on three months' notice.

BVM (the appellant) provided catering and events management services. M was a director of BVM. Y (the respondents) owned a venue called the Great Hall and operated an events management business.

In early 2007, the parties discussed M taking over the management of events at the Great Hall. During those discussions, a draft agreement was produced, which included a two-year fixed term and a clause allowing termination on three months' notice. The parties had a meeting on 4 July during which M stated that he wanted "some security because of his personal circumstances" and so wanted a contract for a period of two years. At the meeting, the three-month notice provision was not mentioned. After the meeting, various drafts of the agreement passed between the parties that contained a three-month notice provision, but nothing was signed.

BVM provided events management services until 8 February 2008, when Y terminated the contract. Y argued that BVM was in repudiatory breach of the contract. Alternatively, Y relied on a right to terminate the contract on three months' written notice. BVM denied any breach of contract. It further argued that the contract was for a fixed term of two years, with no option for early termination at all.

There was no dispute that the parties had concluded an oral agreement for events management services for a period of two years. Neither was it disputed that, apart from the termination-on-notice provision, all the other terms of the draft agreement before the parties at the 4 July meeting were incorporated into the oral agreement. The only term in dispute was the three-month termination provision. To decide that issue the judge had to determine whether the parties agreed, either expressly or tacitly, that the three-month notice provision was an express term of the contract.

The court held that the parties did agree that the three-month termination provision was a part of the contract concluded orally on 4 July 2007. Aikens LJ believed that it was consistent with M's desire for some security, because he had the agreement to a two year term for the contract.

Although the decision contains no new law, it illustrates the dangers of relying on conversations and unsigned draft agreements, with the parties spending time and money litigating the matter. It is essential to ensure that key contractual provisions are always documented, especially those as fundamental as a termination right

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