Broken contract? Whether you realise it or not, you’re playing poker

By James O’Connell, Partner at Mayo Wynne Baxter.

As a business lawyer (albeit one with a special interest in the wine industry and crypto currencies), I am often asked to advise people looking for ways to get out of a contract – or who have had a business partner break a contract with them.

Perpetrator or victim, both sides in a contract dispute are frequently surprised at how the legal position is just one factor amongst many, and often the least important.

Sure, if the matter is going to go to court, then it’s 9/10ths about the law. But most disputes don’t get to court, and so tend to be decided on other things. Court cases are (mostly) boxing matches with the court enforcing Marquess of Queensbury rules. Dispute resolution outside of court, on the other hand, is still boxing, but more akin to the bare-knuckle variety.

So, if you (a) want to get out of a contract in a situation where the contract doesn’t allow you to just walk away, or (b) the person (aka ‘party’) that you have contracted with has unilaterally thrown the contract in the bin. What to do?

Firstly, do what a surprising number of businesspeople fail to do, and really read the contract. Don’t just skim it, glossing over the bits that don’t appear relevant or seem written in language from 1724.

Secondly, make a note of two things:

1. every single situation where the other side had an obligation that it hasn’t kept; and

2. every single time assumptions were made instead of things being spelt out in detail. A typical example is the contract being silent on delivery: who is responsible; was advanced notice required; when did risk of loss pass from seller to buyer (when it left the seller’s factory or when it arrived at the buyer’s premises?).

These breaches and ambiguities are going to be your basic ammunition to justify early termination and/or to counterclaim against somebody who is trying to kill the contract.

There’s usually something to work with because so many people demand a contradictory thing from their contracts. On the one hand they want ironclad protection, but on the other hand they want the contracts immediately, short, in plain English, cheap and acceptable so the other side will sign (i.e. blurring contentious issues in the hope that everyone will sign). This is an impossible circle to square. But since the latter is cheaper, quicker, easier and less confrontational, people usually choose the short, sweet and simple version – which is great unless something goes wrong.

The second thing to do is to look at the entirety of your communications with the other side, and plan them. This is where it becomes a game of poker. The simple truth is you can have the best legal argument in the world, but it is just an argument/opinion unless backed up by a court order. Your arguments can be irrefutable and the other side’s arguments can border on being nonsense, but until a court agrees with you, it’s just two angry people shouting at each other.

You can have a weak case but if the other side genuinely believes that you’re going to pursue it through the courts with ferocity, then they’re likely to compromise.

Equally, you can have a great case but if they think you haven’t got the guts, money or time to follow through, then they won’t give a damn. You have to make sure that they believe that tangling with you is a very bad idea. Poker.

joconnell@mayowynnebaxter.co.uk