Pre-Contractual Representations

Pre-Contractual Representations

The interpretation of commercial contracts is a constant matter of dispute, and regularly comes before the courts.  The expert commercial litigation lawyers at Bahamas law firm ParrisWhittaker are highly experienced in advising and representing commercial parties on the terms of their contracts and on pre-contact negotiations.

Recently, the issue of whether representations made by one contractual party to the other during pre-contractual negotiations amounted to fraudulent misrepresentation, came before the High Court in London1.

What was the background?

The claimant company entered into agreements with football clubs under which each club gave the claimant the right to sell options to fans to purchase tickets for future events – in return for a fee paid to the club. There was a provision in the agreement in which the defendant club promised that it was authorised to perform and observe the terms of the agreement.

The club had agreed that

“the execution of and delivery of the Agreement and the performance and observance of its obligations….is and will be within its power and that it is duly authorized to perform and observe each of the terms of the Agreement”.

However, the club could not fulfil its obligation to the claimant in the case of two important matches as it did not have the right to sell tickets to fans who had bought options from the claimant.  It was the Football Association instead who had control of the tickets.

The claimant argued that at the time the contract was entered into, the club had no honest belief in the truth of its statement and it was therefore fraudulent misrepresentation.  The claimant claimed damages for breach of contract and pre-contractual misrepresentation.  At issue was whether there had been a representation that induced the company to enter into the agreement, and whether the representation was made fraudulently. 

The High Court in London upheld part of the claim, ruling that the representation made by the club and relied upon by the claimant had been false.  The obligation had been breached by the club - it was clearly the responsibility of the club to make sure it could do what it said it could do.     However, as far the claim related to fraud, the claim failed: the court found no evidence that the club had made its representations fraudulently.

What does this mean?

Parties to commercial contracts should not agree terms or enter into legally binding contracts without careful consideration as to whether they are actually able to comply with them (the club in this case unsuccessfully argued that it was the claimant company’s responsibility to get the FA’s permission first).  This is particularly important in relation to standard contracts terms: can you comply with them?

How can we help?

The commercial litigation lawyers at Bahamas law firm ParrisWhittaker have years of experience advising commercial organisations on their commercial contracts – both during negotiations and after the contracts have been signed.  If you are negotiating the terms of a commercial contract or have concerns about you or the other side breaching the terms, contact us straightaway for urgent, strategic advice.

1Ticket2Final OU v Wigan Athletic AFC Ltd [2015] EWHC 61 (Ch)