The important of a binding agreement

Time and time again the courts see disputes come before them because the detail of an agreement was not written down. Another example, the case of Eaton v Caulfield, proves the point well. In this instance, two men had agreed to set up a limited liability partnership to provide lawyers with thei

Time and time again the courts see disputes come before them because the detail of an agreement was not written down. Another example, the case of Eaton v Caulfield, proves the point well.

In this instance, two men had agreed to set up a limited liability partnership to provide lawyers with their own recruitment agency. However, no LLP agreement was ever written. As sometimes happens, relations between the two broke down and following a period of hostilities, Caulfield dismissed Eaton from the business. Eaton claimed that his dismissal was unfairly prejudicial under S994 of the Companies Act 2006 and the court agreed.

Because no agreement had ever been produced Caulfield had to demonstrate that the LLP members had been granted the power of expulsion. Since the business was apparently set up during an "alchohol fuelled train journey from Leeds" this couldn't be shown.

Again the lesson to be learned here - and for any instance where an agreement is reached, be that employment, a contract of sale etc. - is that everything agreed should be written down correctly and signed by all parties.
This was first published in June 2011

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