The Importance of Legally Binding Agreements

The claim in Asher and others -v- Jaywing plc was brought by the shareholders of the defendant company. The claimants alleged that they sold their shares to Jaywing plc according to the terms of a Sale and Purchase Agreement under which Jaywing agreed to immediately make a cash payment to the claimants. In addition to the cash payment, it was alleged that Jaywing also agreed to make deferred payments to the claimants which included three possible earn-out payments depending on the performance of the company between August 2016 and March 2018.

The claimants alleged that Jaywing had breached the terms of the Sale and Purchase Agreement which entitled the claimants to claim damages. Jaywing’s defence was that the claimants did not meet the conditions for the second and third earn-out payments.

The claim was dismissed in its entirety because although it appeared that at least one of the claimants believed that Jaywing agreed to a plan that would enable the claimants to meet the conditions for the earn-out payments, there was no agreement between the parties to that effect.

The key message from this case is that if the parties in a transaction intend to enter into a legally binding agreement then that agreement should be clearly recorded and reduced to writing in order to protect the interests of the parties involved.

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