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Oral Contracts Are a Recipe for Dispute!

HotelThe trouble with oral contracts, agreed without taking legal advice, is that their terms, and even their existence, may later be disputed. Exactly that happened in one case in which an interior designer had to resort to legal action in order to be paid in full for his work on the refurbishment of a luxury hotel.

The designer carried out hundreds of thousands of pounds worth of work in reliance on an oral agreement with a company higher up in the contractual chain. After a payment dispute arose, an adjudicator ordered the company to pay him more than £147,000. However, in challenging the adjudicator’s jurisdiction, the company argued that no contract had ever been concluded.

The High Court noted that it was theoretically possible for parties to carry out works, and to receive substantial payments, without having any legally binding agreement in place. However, on the evidence, the Court found that it was clear beyond argument that a contract did exist. The agreement was probably in the broad terms contended for by the designer and summary judgment was therefore entered against the company for the amount of the adjudicator’s award, plus interest and legal costs.