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Implied Terms Case Summary: Barton v Morris [2023] UKSC 3

Clarity on the Lack Thereof – Barton & ors v Morris & anor [2023] UKSC 3

On 24 January 2023, the Supreme Court handed down judgment in Barton & ors v Morris & anor [2023] UKSC 3 – a decision that:

“[…] on beautifully simple facts, raises some interesting issues on contractual implied terms and on the relationship between the law of contract and the law of unjust enrichment.”

The decision can be found here.

The Background

Mr Barton and Foxpace Ltd entered into an oral agreement under which Foxpace agreed to pay Mr Barton £1.2 million if Nash House was sold for £6.5 million to a purchaser introduced by Mr Barton.

Mr Barton introduced Western UK (Acton) Ltd to Foxpace as a potential purchaser of Nash House at a purchase price of £6.5 million. In fact, Foxpace agreed to sell to Western for the reduced sum of £6 million plus VAT.

The reduction in price from £6.5 million was to take account of the fact that Nash House was situated on land that might be acquired by or on behalf of HS2. It was accepted, on the basis of prior negotiations between Foxpace and Western, that this reduction in sale price was reached in good faith.

The sale having been completed, Foxpace refused to pay Mr Barton the £1.2 million he claimed that he was owed. Instead, a "goodwill gesture" of £400,000 was offered, which Mr Barton refused. Mr Barton brought a claim for compensation for breach of contract and, in the alternative, pleaded unjust enrichment.

The Decision at First Instance and on Appeal

The judge at first instance, HHJ Pearce sitting as a High Court Judge, held that Mr Barton was not entitled to any payment. HHJ Pearce found there was no written agreement on which Mr Barton could rely and the terms of the oral agreement.

The Court of Appeal allowed the appeal and held that Mr Barton was entitled to £435,000, the sum assessed as being reasonable remuneration for Mr Barton’s services, on the basis that:

“the contract was simply silent as to what was to happen if the price paid by the purchaser so introduced by the appellant was less than £6.5 million. Indeed, if it be relevant, the judge found as a fact that (most surprisingly, to my way of thinking, given the commercial property context) the parties had not even applied their minds to such a scenario.”

Asplin LJ, in her leading judgment, offered an alternative analysis suggesting that the sum might be payable on the basis of an implied term – one that:

“would not contradict the express terms of the Agreement, is capable of clear expression, is so obvious that it goes without saying and is necessary to give the Agreement business efficacy and it lacks commercial coherence without it.”

The further appeal was heard by the Supreme Court in November 2022. The hearing of the appeal can be viewed here (part 1) and here (part 2).

The Decision of the Supreme Court

By majority, Lady Rose (with whom Lord Briggs and Lord Stephens agreed) concluded there was no implied term of reasonable fee:

“[…] the effect of the contract as found by the judge was indeed that Mr Barton was only entitled to be paid if the event that they agreed would be the trigger for that payment occurred. To imply a term that Foxpace is liable to pay a commission in any other circumstance goes directly against what the judge found the parties had agreed.”

Lady Rose also found a reasonable fee could not be implied as it was not possible to say there was any particular fee to which the parties would have agreed, or which is so obvious that it goes without saying and it is not necessary to imply such a term to give business efficacy or coherence to the agreement.

The claim in unjust enrichment was discussed but ultimately failed for:

“[…] for reasons which mirror the reasons for rejecting the implication of a contractual term. When parties stipulate in their contract the circumstances that must occur in order to impose a legal obligation on one party to pay, they necessarily exclude any obligation to pay in the absence of those circumstances; both any obligation to pay under the contract and any obligation to pay to avoid an enrichment they have received from the counterparty from being unjust. The “silence” of the contract as to what obligations arise on the happening of the particular event means that no obligations arise as Lord Hoffmann made clear in Belize cited earlier. This excludes not only an implied contractual term but a claim in unjust enrichment.“

The disagree to agree to disagree

Lord Leggatt, joined by Lord Burrows, agreed with the analysis of Asplin LJ:

“The essential reason why [implied terms] are necessary is, to put the point colloquially, that life is too short to negotiate contract terms designed to cover every contingency that may occur. Even the most comprehensive and carefully drafted written contract cannot anticipate and provide expressly in advance for every possible contingency.”

Interestingly, the dissenters split on the issue of unjust enrichment with Lord Leggatt rejecting the claim from [191] onwards and Lord Burrows pioneering the only acceptance of the claim at [226] – [240].

This case summary was written by First Six Pupil, Joshua Cullen.

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