Leading TV programme maker Endemol pulled out of discussions over its use of a property to shoot a programme. The property owner sued, saying a handshake on site and a signed and returned draft contract concluded an agreement. Was Endemol committed?
Who: McNicholas Construction (Holdings) Limited -v- Endemol UK Plc
Where: Chancery Division of the High Court
When: October 2003
TV show producer Endemol was looking for a property at which to shoot a new TV programme over a period of 14 weeks. In July 2002 it met with a representative of the claimant in this case, McNicholas Construction (“MC”). The parties shook hands at that time and this was followed in August 2002 by a draft contract which was sent to MC by Endemol. It described itself clearly as a draft and invited further comments for consideration. MC made some amendments to the draft, signed it and sent it back to Endemol later that month. Endemol subsequently found an alternative property which it preferred and the discussions with MC went no further.
MC sued Endemol for breach of contract and in the alternative argued that Endemol was “estopped” from using any property for the shoot other than MC’s.
Endemol defended on the basis that no concluded contract had ever been reached and there was no “shared assumption” between the parties of the kind that the doctrine of estoppel requires before it operates.
The Court agreed with Endemol and threw out the MC claim.
The July 2002 handshake was on the evidence not done to seal a bargain, and it was quite clear from the draft contract sent in August that a number of important issues remained to be agreed. MC could not bounce Endemol into concluding a contract at that time by making changes to the draft, signing it and sending it back to Endemol, and Endemol could not be taken to be content with the alternative wording suggested unless it expressly said so, which it never did.
Summing it up, the contract was described at that time as a “draft” and when it came down to it, the situation in August 2002 was that the normal pre-contract state of affairs obtained. In other words, the parties were hoping that terms could be agreed but nothing had been concluded. So there was no contract and since there was no shared assumption between the parties and Endemol had done nothing to lead MC, in the Court’s view, to believe that Endemol would proceed with the deal, there was no estoppel either.
Why this matters:
All the time that agreements clearly marked as “drafts” are passing between possible contracting parties, it is going to be difficult to persuade a Court that a concluded contract is already in place. Altering and signing a draft and sending it the other party does not of itself change that situation. Marketinglaw has previously commented that if parties to negotiations want to minimise the risk of getting involved in the sort of scenario which this litigation dealt with, they should go even further and clearly mark all drafts and related communications “subject to contract”.