Gentlemen’s Agreements
If you want to do business with a gentleman (or lady), why on earth would you rely on their ‘word’?
At its best, a gentlemen’s agreement (a verbal agreement) is as enforceable (or unenforceable) as any other verbal contract. Much will depend on trying to establish what the terms of the agreement are, which could be contained in a letter, a series of letters, an e-mail exchange, or even scribbled on a napkin during a meal – the traditional ‘back of envelope’ document.
Whilst it may be possible to establish some of the terms of an agreement, it will at best be cumbersome and time-consuming assessing this. There is also a substantial risk that some points may be missed out altogether. Another risk lies in trying to establish to the satisfaction of a Court that the terms of the contract were agreed between the parties.
You can see where this is going… You really should not rely on any form of verbal agreement, get it in writing! It is not always necessary to create a lengthy and complex contract, simple bullet points of what has been agreed may well be enough.
The ‘Heads of Terms’ or ‘Heads of Agreement’ are a very useful compromise between having nothing at all and a comprehensive commercial agreement as mentioned above.
Whilst Heads of Agreement are typically expressed to be non-binding and of no legal effect, it is possible to have binding Heads of Terms if the parties are confident that the bullet points are sufficiently detailed to give a concise “mini-contract” from the date of signing. The risk is that the Heads of Terms will not do this, and the parties will agree to take on obligations that may prove difficult or impossible to enforce.
As always, it is sensible to take proper legal advice on any such document before signing.
For more information contact BEST member Nick Richardson at RHW Solicitors. nick.richardson@rhw.co.uk
