(Un)Doing deals down the pub? Mike Ashley style

No matter what you might think of Mike Ashley, he is nothing if not an astute business man.

So, did anyone really believe that during an evening in the pub, where Mr Ashley himself said another member of the group “kept the pints coming like machine guns”, that he would seriously agree to pay another business man £15 million if the Sports Direct share price rose enough. Well apparently the man on the other end of that “offer”, Jeffrey Blue, thought this was deadly serious. So much so that he was willing to sue Mike Ashley in the High Court. Unfortunately for Mr Blue, this has not worked out particularly well for him, as he has just lost his case and will not see that £15 million.

In a January 2013 meeting at the Horse & Groom pub on Great Portland Street in London, Mike Ashley and a consultant working for Sports Direct at the time, Jeffrey Blue, met with three top officials from an investment bank. The drinks were flowing “like machine guns” and at some point in the evening the conversation turned to Sports Direct’s share price.

Jeffrey Blue’s role was to look for strategic opportunities throughout the UK and Europe, and by extension, to keep Sports Direct’s share price on the rise. At that time, the share price was around £4 per share and one of the investment bankers suggested that Mr Blue should be due a reward if the share price ever reached £8. Some numbers were bounced around between them in what most of the group called “banter”. Mr Blue’s recollection was that Mr Ashley said:

“What should I do to incentivise Jeff? If he can get the stock to £8 per share why should I give a fuck how much I have to pay him, as I will have made so much money it doesn’t matter. So let’s say if Jeff can get the stock to £8 per share in the next three years, I’ll pay him £10 million. Jeff: what do you think?”

After the night in the pub, nothing was recorded in writing. And even though Mr Blue claims to have had a number of conversations with various people about this offer, including Ashley, in the period after the conversation, none of these were recorded in writing either.

The Sports Direct share price hit £8 per share on 25 February 2014. Sure enough, whilst Mr Ashley did make a payment to Mr Blue of £1 million (which Ashley claims was for a separate reason), Mr Blue never did see that £15 million figure that was thrown around in the Horse & Groom.

Blue, who by this point had surely convinced himself that he was absolutely entitled to £15 million, decided to sue Mike Ashley for that money. His argument was essentially along the lines of “well this is Mike Ashley, I don’t care that no ordinary business person would make a £15 million pound deal over many beers in a pub without anything being written down, Mike Ashley is not an ordinary business man.” Unfortunately for him, the judge thought Mike Ashley was far more astute that this and concluded that the conversation fell someway short of constituting a binding contract. Therefore Mr Blue was not entitled to the money, and has been told to pay a large portion of Mr Ashley’s legal costs.

This case is not authority to say a binding contract could not be made verbally in a pub, just that one requires some compelling evidence to support such a contention.

The conclusion: a deal is not a (legally binding) deal unless there is a sufficiently certain agreement, that both parties intend to be legally binding, and where both parties are providing some form of value to the other. English law, strangely I know, does not care that it is Mike Ashley on the other side of the deal!

The writer is sure that the spectre of doing deals down the pub is not the only unusual forum for a contract formation. Now, what of those many football deals that are struck in motorway service stations, with terms thrashed out on a Burger King receipt? Could we see some of those unravelling before the Courts next ……. Place your bets.

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