A City finance firm are suing a client for fees over a £20million deal that was never put in writing.
A corporate financier firm are pursuing a client to court over a £1.4million unpaid bill. The catch, the ‘defendant’ was never asked to sign a contract.
In what represents a surprising break from the City norm of complex contracts detailing every aspect of a deal in indisputable black and white, the head banker working on the case failed to put the deal in writing.
As a consequence, investment firm Green Park Ventures (GPV) have refused to pay the 7% commission Cenkos Securities claim they are owed after negotiating a £20million deal on their behalf.
Details of the case filed by Cenkos at the High Court acknowledge that "there was no discussion of the fees Cenkos would charge". However, they also state that fees were later agreed during a series of meetings and telephone conversations, although nothing was ever put in print.
Should the case make it to court it would prove to be a major test of the validity and acceptable use of oral contracts for business deals in the City, perhaps having wide repercussions.
Technically, while infrequently implemented, oral contracts are valid in certain circumstances under British law. This is namely when one party instructs another to carry out a service on their behalf in the full knowledge that the service will come at a cost. It is on this principle that Cenkos’s lawyers will argue their case.
"It was obvious that Cenkos was not to provide its services gratuitously and accordingly that GPV would pay." a Cenkos representative commented.
While GPV have acknowledge that they are confident of their defense, they have declined to comment further on the issue.
