Mike Ashley (Founder of Sports Direct) is being sued by former advisor, Jeff Blue, for a £15 million promise he made when drunk in 2013 – payable if Blue could help double Sports Direct’s share price within three years. Ashley has dismissed his claim as pub “banter” and refuses to pay.
This case will necessarily hang on the findings of fact decided by the Court. Whilst we have not seen the evidence before the Court, we anticipate the matters the Court will want to consider include;
Was the agreement a binding contract?
An oral contract is binding. However, in a dispute such as this, it may be difficult to prove the terms of the contract when no formal record of the agreement exists. The key elements of a contract are:
- Intention to create legal relations
- Certainty of terms
According to press reports, it appears there was a basic offer and acceptance albeit the terms were somewhat vague and ambiguous. An offer ought to be specific and made with the intention of being bound by acceptance. Ashley may have simply made an invitation to negotiate, to which formal contractual negotiations may be expected the following day.
If the Court establishes an offer and acceptance has taken place, it will then examine whether the parties “exchanged consideration”. In legal terms, consideration is “something of value given by both parties to a contract that induces them to enter in the agreement to exchange mutual performances”. This could be a payment, an action, perhaps even a further promise. Here, Jeff Blue’s consideration was to do what was necessary to raise the share price. Mike Ashley’s part of the bargain was to make payment if this was achieved.
The most debatable issue appears to be whether the parties intended to create legal relations. Were the parties in the pub specifically to discuss the alleged business deal? The purpose of the meeting must be established. If, as is suggested, Mike Ashley holds many business meetings in a social setting, the context will be relevant to the decision. However, the Court may find that there was no intention to create legal relations at that particular point because it was, as Ashley says, pub “banter”.
Did Mike Ashley have the capacity to make the offer?
An existing common law principle states a contracting party must have the requisite ability and understanding to enter into a contract. Individuals who are drunk may arguably lack capacity. If this is Ashley’s defence, the burden of proof will fall to him. If, as it seems, there is evidence he frequently drinks in binge quantities, one would expect his tolerance to be higher.
In Fehily v Atkinson  EWHC 3069 (Ch), the Court confirmed previous authorities, which state that in order to have mental capacity, a person had to be capable of understanding the ‘nature of the transaction’. Whilst it is alleged Ashley regularly pays out large bonuses in business relationships, he also gave evidence stating he was drinking 4-5 pints per hour and was out to get drunk. His level of drunkenness and capability to comprehend such an offer will be for the Court to decide. Whether or not he had the required capacity to enter into a contract will be a question of fact specific to the circumstances of this situation.
If the parties did intend to formalise the agreement it would have been prudent to follow up their conversation the following day and put their agreed terms into a written contract signed by both parties so that the terms of the agreement were certain.
If you need advice on matters of contractual dispute, our dispute resolution partner Sangita Manek, may be contacted on 01923 725 004 or firstname.lastname@example.org
“Mr Blue also alleged that Mr Ashley was so unorthodox that he had held meetings in a casino and once lost a “game of spoof” to decide who would pay £750,000 in legal fees related to the flotation of Sports Direct.”