United Kingdom: Oral Contracts: Deal Or No Deal?

United Kingdom: Oral Contracts: Deal Or No Deal?

Sadly for Noel Edmonds, it was no deal. Noel didn't record his contract with his developer
friend in writing. The developments didn't go well and the house party ended in litigation.

Noel argued that various important terms had been said but never recorded. The Court's
view? Noel's version of events didn't stack up. The Court preferred the written word. The
developer friend won and Noel picked up the costs bill. His very own Gotcha.

Tom Holroyd takes a look at why this case serves as a poignant reminder to properly
record deals in writing.

Background

Poor old Noel Edmonds. He just seems to attract disputes. You'd have thought the
"Blobbygate" affair with Lancaster City Council in 2003 would have put him off. But alas,
no. Here's what happened this time.

Noel had a close friend; Mr Ulrik Larson. Ulrik was a property developer and Noel is the
chap from the telly. Noel and Ulrik decided to go into the property business together.
They became involved in two properties; "Wood House" and "St Serf".

Wood House

Wood House was a grand country estate, but it was in a bad way. Ulrik thought it could
be refurbished, with other properties being built in the grounds. Ulrik and Noel smelt a
profit and bought the place in Noel's name in 2006. It cost £2.1m.

To fund the purchase, Noel borrowed £1.6m from the banker. As usual, the banker took a
first charge over Wood House to secure the loan. Noel then put in £300,000 of his own
money.

Ulrik also put in £300,000, but borrowed from his banker. Ulrik's banker then took a
second charge over Wood House to secure its loan. For the benefit of the two bankers, a
priority deed recorded that Noel's banker's charge ranked ahead of Ulrik's banker's
charge.

One small problem though: Ulrik and Noel didn't bother to record any of the terms of the
arrangement between themselves. Some form of "joint venture" was discussed but never
formalised. It seems clear that Ulrik was supposed to try to get the planning consents
needed to turn the Wood House estate into something profitable. That was about all that
was agreed; none if it in writing.

They probably would have worked something out if the development of Woodhouse had
gone to plan. It didn't go to plan. The development was a non-starter commercially. The
planners didn't like the idea of 25 houses being built in the Grade I listed gardens of the
estate. Noel ended up selling Wood House at a loss. After he'd redeemed his £1.6m loan
and paid Ulrik his £300,000, Noel only got back £52,000 of his £300,000. He'd also
incurred a lot of cost just maintaining the place.

Inevitably, Noel and Ulrik fell out over who should bear the losses. Noel sued Ulrik. The
main thrust of Noel's case was that, before the bankers' priority deed was signed, Ulrik

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Indeed. It was agreed that Ulrik would undertake a full scheme of renovation.000 before Ulrik. St Serf Noel needed a new family home. and Noel's own legal costs are thought to be around the £500. the Judge simply couldn't see why Ulrik. Ulrik continued the work nonetheless. Noel had bet on the wrong box again. The costs were high. Gotcha. the Judge preferred the written word over a vague oral statement. Noel had to bear all the losses on the sale price. the loser pays the winner's costs. the Judge didn't agree with him. Noel argued that Ulrik had agreed to perform the services at no cost because "it was in the spirit" of their joint venture. including whether Ulrik was to charge any mark-up on cost for his services. He found it inconceivable that Noel would have freely executed the bankers' priority deed if there truly had been some prior agreement that Noel would get his £300. Noel therefore sued for his £300. United Kingdom: Oral Contracts: Deal Or No Deal? had agreed that Noel would get his £300. In essence. the Judge favoured the commercial approach. Ulrik said this was nonsense and nothing like that had been agreed. St Serf was a bit run down so Noel got Ulrik on the case (they were still friends at this time). said Ulrik. Ulrik simply submitted an invoice each month for payment. The Judge couldn't agree with Noel's version of events. As usual in the English civil court system. No deal. particularly in relation to whether Ulrik was charging a mark up.000 mark. When Noel sued Ulrik over Wood House.000 but he did have to make a further contribution to the maintenance costs Noel had incurred. including a mark up to cover his services.000 back. Page 2 of 3 .000 and a contribution to the maintenance costs. as a businessman. Things went smoothly enough at first. when things got heated over Wood House. Rumour has it that Noel must pay £175. As is so often the case. However. he got his £300. would have agreed to provide the services for free. All that oral testimony and lawyers' argument over the terms of what was and wasn't agreed cost a fortune. A victim of his own Gotcha. The payments to Ulrik stopped. Ulrik counterclaimed for the costs of completing St Serf. It made no commercial sense and in the absence of any written agreement recording the alleged freebie.000 towards Ulrik's legal costs. Noel didn't need to engage a main contractor and professional team himself as Ulrik was to manage all that. Noel then paid it without demur. Oh. it was akin to a design and build arrangement. with Ulrik as the D&B contractor and Noel the employer. Noel started to question the St Serf invoices. said the Judge. One small but familiar problem: the chaps didn't bother to record anything in writing regarding this arrangement. In 2006 he bought a nice pad in Exeter called St Serf. Gotcha Noel had lost on both the Wood House and St Serf claims.000 back before Ulrik got his £300. Although nothing specific was agreed in terms of Ulrik's fees.

It is in those instances that a good. That's what Noel and Ulrik must have had in mind. Problems tend to get washed away in deals funded by the profits on the job. robust written contract will come to your rescue. They thought the Wood House development was a dead cert. They could afford to sort out the money later. This way. Unless you have robust and credible witness evidence to support an alleged oral term. Oh. don't expect it to prevail over any commercially sound written agreement. Page 3 of 3 . They were wrong and sorting out the money turned into an expensive mess. you best grab a grand. Having a robust contract increases certainty. no one has certainty and the non-payer has the wiggle-room he needs. A sure-fire way to increase the likelihood of a dispute is to fail to properly record what has been agreed. disputes are far more likely as those involved tend to look for excuses not to pay. Running a case based on oral terms is notoriously expensive. Better to just take the time to record the agreement properly. quite a few grand in fact. Noel has also neatly demonstrated the Courts' view on oral terms. disputes are less common. United Kingdom: Oral Contracts: Deal Or No Deal? Lessons learned When the going is good. When the going isn't so good and the profit not so healthy. as Noel found out. It leaves less wiggle-room for the party looking for excuses. the parties know what they are getting and when. and if you do need to argue an oral term.