Directors’ phone call amounted to binding agreement

A conversation that took place between the managing directors of two companies amounted to a binding agreement and had to be honoured, according to the High Court.

The case involved Mansion Place Ltd v Fox Industrial Services Ltd.

Mansion had engaged Fox to refurbish and extend student accommodation.

There were delays in the performance of the works.

Fox said they were due to the Covid-19 pandemic and, to a greater extent, Mansion’s failure to give timely possession of the site and to clear it of students.

Mansion said that Fox had failed to progress the works and to commit sufficient labour and resources.

The situation was discussed by the managing directors of each company in a telephone call to resolve the situation while each was driving.

Fox said the conversation resulted in a binding agreement that Mansion agreed to forego any entitlement to liquidated damages and in return Fox agreed to forego any right to claim payment for loss and expense resulting from the delay.

Mansion insisted there was no such binding agreement, but an adjudicator found that there was.

The High Court upheld the adjudicator’s decision.

It held that the court was able to make a finding as to the gist of the conversation on the balance of probabilities.

The two parties had reached a binding agreement that Mansion agreed to forego its right to liquidated damages under the contract.

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