Banter Doesn't Create a Contract

The trouble with light-hearted discussions of important business matters in a social context is that none of those present can really be sure whether any agreements apparently reached are serious or merely a joke. Exactly that happened in one case in which a £15 million deal was alleged to have been struck over drinks in a pub.

A financier who worked as a consultant for a publicly listed company claimed that the company's chief executive had agreed to pay him a £15 million bonus if its share price doubled within three years. That target was reached and the financier launched proceedings to hold the chief executive to what he claimed was a binding deal.

The High Court accepted that the bonus offer had been made and that the financier had expressed his agreement to the proposal. In dismissing the financier's claim, however, the Court found that the conversation had been a jocular one and that there had been no intention by either man to enter into legal relations.

The bonus offer had been greeted with laughter by those present and no reasonable person would have thought that it was serious and that there was an intention to create a contract. They all thought it was a joke and the fact that the financier had convinced himself that the offer was a serious one revealed only that the human capacity for wishful thinking knows few bounds.