LOVELY PROFESSIONAL UNIVERSITY

MITTAL SCHOOL OF BUSINESS LOVELY FACULTY OF BUSINESS AND ARTS

Name of the faculty member: Dr. Rajni Chabbra

Course Code: BSL 201 Course Title: Legal Aspects Of Buiness

Academic Task No: 1 Academic Task Title: Assignment-1

Date of Allotment: 7/02/22 Date of Submission:21/02/22

Student Roll No: RQ2109B64 Student Reg. No: 12103337

Term: 1 Section: Q2109

Max. Marks: 30 Marks. Obtained:

Evaluation Parameters:

Learning Outcomes:

1) I have learned to analyse a case study.

2) I have learnt to comprehend a case law.

3) I have learnt to frame questionnaire out of a case.

Declaration:

I declare that this Assignment is my individual work. I have not copied it from any other students
work or from any other source except where due acknowledgement is made explicitly in the text,
nor has any part been written for me by any other person.

Evaluation Criterion: Rubrics on different parameters.

Student’s Signature: Khushi Bansal

Evaluator’s Comments:

General Observations Suggestions for Improvement Best part of assignment

Evaluator’s Signature and Date:

 Blue vs Ashley(2017)

Facts of the Case

 Blue was an investment banker. Ashley was the founder and majority shareholder of
Sports Direct. The pair had prior business relationships, but did not know each other
well. In 2012 Blue was employed by Sports Direct’s subsidiaries. One of his first
tasks was to find a new corporate broker for the company. To facilitate this, he
arranged an informal meeting between himself, Ashley and representatives from
Espirito Santo Investment Bank.
 The men met at a pub for drinks. The group hit it off, and the atmosphere was jovial.
What was originally conceived of as a short chat turned into a longer evening of
heavy drinking, which eventually moved to a Soho bar.
 Early in the evening, after Ashley had consumed four pints, the men were discussing
Sports Direct’s share price. At some point, the topic of incentivising Blue based on
the company’s share price came up. Ashley stated:
 ‘What should I do to incentivise Jeff? If he can get the stock to £8 per share why
should I give a fuck how much I have to pay him, as I will have made so much money
it doesn’t matter. So let’s say if Jeff can get the stock to £8 per share…I’ll pay him
£10 million. Jeff: what do you think?’
 Blue responded that this would require him to up the company’s share price from £4 a
share to £7.20. Tracey stated that this would be immaterial compared to the increase
in value of Ashley’s own shares in the company. One of the other Espirito
representatives jokingly added that a fairer incentive would be £20 million. Ashley
allegedly responded to this by saying ‘I’ll tell you what let’s split the difference and
call it £15 million if the stock gets to £8 per share…’
 Blue responded that this sounded fair. When Sports Direct’s share price began to rise,
Blue asked Ashley if the agreement was ‘still on’. Ashley responded ‘I’ve got it, I’ve
got it. We’re cool, we’re cool.’
 The company’s share price later exceeded £8. Blue attempted to enforce the incentive
agreement. Ashley denied there was any binding agreement. He argued that the
conversation was ‘general banter’ and not seriously intended.

Issue
1) Was Ashley’s statement an offer?
2) Did Ashley intend to be legally bound by the statement?
Relevant Rule / Law
1) Agreement

Rebutting the Presumption

If the context of a conversation is informal and social, this may indicate that there is no
intention to create legal relations even between business associates.

2) Offer

Tone and Humour

If the tone or setting of the conversation is informal or appears to be in jest, there is likely no
offer.

Vagueness

A vague or equivocal statement is less likely to be an offer than a clear and unequivocal one

Decision
The Court held in favour of Ashley. The following factors indicated that Ashley did not make
an offer which he intended to be legally bound by:

1. The informality of the setting.

2. The ‘jocular’ and ‘mischievous’ tone of the conversation.

3. Ashley being drunk.

4. The presence of strangers.

5. The ‘incentive’ made no commercial sense for Ashley. He did not know Blue well, had not
offered similar incentives to anyone else in the past and the number chosen was essentially
random.

6. The meeting was not arranged to discuss Blue’s work or his role at the company.

7. It was not clear how a single person could double a company’s share price. The ‘offer’ was
vague as to what exactly Blue needed to do. Indeed, the share price doubling probably did not
have much to do with Blue’s efforts.

8. Ashley’s later responses when asked about the agreement were vague and indicated that he
did not even remember the pub conversation.

Given these factors, a reasonable bystander would not conclude that there was a binding
contract. Even if there had been a seriously intended agreement, it would be void for
uncertainty. This was because the parties had not agreed on the time-frame which Blue had to
double the share price.

Analysis
This case contains a summary of the basic principles of contract law, including an outline of
the requirements of contract formation: offer, acceptance, intention to create legal relations,
consideration and certainty of terms. The case focuses primarily on the first and third
requirements.

An offer is an expression, by words or conduct, of a willingness to be bound by specified

terms as soon as there is acceptance by the person to whom the offer is made. This is assessed
objectively, from the perspective of a reasonable bystander in light of ‘all relevant matters of
background fact known to both parties’. The parties’ subjective interpretations are irrelevant.

Something might seem to be an offer if taken literally. However, if it is said in circumstances

which indicate that the speaker does not genuinely intend to be bound if the statement is
accepted, it is not an offer. Some cases have called statements like these ‘mere puffs’.

Factors relevant to deciding whether something is an offer or a mere puff include:

1. The formality and setting of the occasion in which the ‘offer’ was made;
2. The speaker’s tone (e.g. whether he was being jokey);
3. Whether the offer makes any commercial sense for the speaker;
4. Whether the statement is vague or seems exaggerated.

These factors are also relevant to determining whether the third requirement of contract
formation is met: intention to be legally bound.

Additional facts
One of Ashley’s subsidiary arguments was that Blue had not provided any consideration.
This was because he was already obliged to work for the company, and past obligations
cannot be relied on as consideration. Leggatt J suggested that the past consideration rule has
been rendered ‘obsolete’ by cases such as Williams v Roffey Bros [1999] 1 QB 1. In any
case, Leggatt J stated that the rule did not apply here. This was because the past obligation
was owed to the company and not to Ashley directly.
Conclusion
 Someone can use the language of offer without expressing a genuine willingness to be
bound
 Even where a real offer is accepted, there is a further requirement of intention to
create legal relations
 Factors which tend to show an agreement was not intended to be legally binding
include that it was made in a social context, expressed in vague language and the fact
that the statement was made in anger or jest
 On the facts, no reasonable person present at the pub would have thought that the
offer was intended to create a contract
 Intention to create legal relations
 MWB Business Exchange Centres Ltd
Vs
Rock Advertising Ltd
Facts of the Case
 The defendant and claimant agreed to allow the defendant to occupy property
managed by the claimant. The contract contained a ‘no oral modification’ (‘NOM’)
clause. This clause provided that ‘all variations to this licence must be agreed, set out
in writing and signed on behalf of both parties before they take effect’.
 The defendant began missing payments under the agreement. Over the telephone, they
agreed on a revised payment schedule with one of the claimant’s employees. The
defendant began paying under this revised schedule. Later, however, the claimant
denied that the agreement had been varied.
 The claimant sued for the outstanding payments. The defendant argued that the parties
varied the contract over the phone. The claimant responded that the NOM clause
prevented this. Alternatively, they contended that there was no variation because the
defendant provided no consideration: they were already bound to pay a higher
amount.
 The defendant countered that the NOM clause was ineffective, for either of two
reasons: either NOM clauses are inherently unenforceable or the claimant had waived
or was estopped from relying on the clause. They also argued that paying under the
revised schedule conferred the claimant a ‘practical benefit’- which was good
consideration to vary an existing agreement.

Issue
1. Are NOM clauses binding?

2. Was the claimant estopped from relying on the NOM clause?

3. Did the defendant confer a practical benefit or other consideration on the claimant?

Relevant Rule / Law

1) Express offer

‘No Oral Variation’ Clauses

If the written contract contains a term which states that the contract cannot be varied by oral
terms, an oral statement cannot vary the contract

2) Consideration
Exception- Practical Benefits

Where a contractual duty is owed to the claimant, another promise to perform that duty can
be valid consideration if it confers on the claimant a ‘practical benefit. This is particularly
important where the promisee seeks to vary the original contract.

Decision of the Case

The Court of Appeal held in favour of the defendant. The principle of freedom of contract
meant that NOM clauses could not fetter the parties’ ability to vary the contract by any
means. The NOM clause did not, therefore, preclude the contract being varied over the
phone. The defendant’s payment conferred sufficient practical benefit on the claimant to
amount to good consideration for the variation. The claimant was therefore unable to recover
the higher sum.

Arden LJ and Kitchin LJJ considered that if the agreement had not been varied, promissory
estoppel would not have applied. This was because it was not inequitable in the
circumstances for the claimant to go back on their promise. Factors which influenced this
conclusion included the fact that the defendant had not suffered any detriment and the
claimant had given reasonable notice that they intended to insist on their full legal rigts.

Additional facts
Something might seem to be an offer if taken literally. However, if it is said in circumstances
which indicate that the speaker does not genuinely intend to be bound if the statement is
accepted, it is not an offer. Some cases have called statements like these ‘mere puffs’.

 The benefit of obtaining performance rather than having to sue for or deal with a
breach;

 Some additional benefit which is external to the parties’ bargain or something beyond
the mere benefit of avoiding a breach.

Additionally, it is controversial whether a practical benefit should be good consideration in

‘promise to pay less’ cases. So far, those cases have been governed by the rule in Pinnel’s
Case [1602] not the rule.

Arden LJ and Kitchin LJ appeared to adopt the second definition, and thought that the
practical benefit doctrine could apply in ‘promise to pay less’ cases.

The practical benefit Kitchen LJ identified in this case was fact that the defendant would
continue to occupy the building (meaning it would not be left empty). This would also mean
that the defendant could stay in business, increasing the likelihood that it could eventually
pay off all the arrears.
Conclusion
 An alteration by oral agreement is ineffective.
 The reason being the original licence agreement contain a ‘No Oral Modification’
clause, such that “All variations to this Licence must be agreed, set out in writing and
signed on behalf of both parties before they take effect.”
 The oral agreement needs to be reduced in writing and signed by both parties.
 Altering the original contract orally, where the terms say that it cannot be modified
orally, the Courts should naturally infer that, because the parties have failed to
observe this formal requirement to put the alteration in writing, both parties had not
intended to dispense with the ‘No Oral Modification’ clause, but they had overlooked
it.