Express Terms Were Clear; Success Fee Not Payable

A commercial contract may provide for payment of a success fee contingent on a specified event or achieving a minimum price. However, the terms must be clearly defined to reduce the risk of a dispute. The award-winning commercial lawyers at ParrisWhittaker are experienced in advising businesses across the Turks & Caicos Islands (TCI) on their contractual terms.

Robust and effective drafting of contract terms are imperative for smooth commercial relationships. A clause providing for a success fee is likely to be a key factor persuading the parties to complete the contract – it will be a valuable condition. Unsurprisingly, a dispute as to whether or not a success fee has fallen due can escalate, as happened in a recent case.

What is a success fee?

A success fee is the obligation to pay a sum of money (or a percentage of a future unknown amount) to the other, contingent on winning a claim – or (in a commercial relationship) as a financial incentive or reward provided an event occurs.

What happened in this case?

In its simplest terms, RB was CEO of a company called Contra and he provided consultancy services to MB. These related to a potential sale of the JCB Group – the leading construction manufacturing company.

Under the terms of the contract, MB agreed to pay a £2.6m success fee for RB’s services up to and including a settlement of various disputes between MB and his brother. In addition, RB was to be kept updated as to the settlement being agreed; and the steps being taken to prepare JCB Group for sale.  When the contingent event took place, the success fee was duly paid – there was no dispute around this.

However, the contract also provided for a second success fee payable for additional services provided by RB as commercial advisor for the sale on completion of JCB Group – a sale that never took place.  Contra claimed breach of contract.

At issue for the court was whether or not the obligation to pay the additional success fee had arisen. The court found it clear from the express terms of the contract that the time for payment of the second success fee was on the completion of a potential future event – completion of the sale of JCB Group.

As the court pointed out, the parties had identified and chosen just one future transaction which would give rise to the second success fee. That transaction did not materialise, therefore there was no trigger requiring payment of the additional success fee.

Contra tried to argue for an implied term that the additional success fee was payable on any other restructuring of the group – or at least, for services rendered by RB after the settlement date. However, the court rejected this because to imply terms to that effect would be inconsistent with the express terms agreed by the parties.

What does this mean?

The ruling is effectively in line with the courts’ consistent approach to contractual interpretation. Express terms agreed between the parties will not be interfered with unless there is inconsistency, and terms will only be implied into the contract if necessary for business efficacy or coherence.

If you need specialist legal advice on your contractual terms or your rights and obligations under your existing contracts, get in touch with the experienced commercial lawyers at ParrisWhittaker on info@parriswhittaker.com or +1.242.352.6112

¹Contra Holdings Limited v Mark Bamford [2023] EWCA Civ