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Legal Eagle

Contracts

Q: Breach of contract by funder

Our theatre group secured the written promise of some valuable sponsorship from a local company. Now the firm says it will not hand over the cash unless we can secure matching funding from another source this year. Where do we stand?

A: Unfortunately for you, a written promise does not create a contractual obligation unless it is supported by consideration, i.e. unless the party making the promise was to receive something in return from the party to whom the promise was made. An exception is if the promise was made in a document described and executed as a deed or if the seal of the company giving the promise was affixed to the document concerned, which I think is unlikely in your case.

If in return for the promise of sponsorship you had agreed to provide some form of advertising or publicity for the local company concerned, e.g. by acknowledging its sponsorship in your own promotional literature, that might be sufficient consideration to render the promise enforceable and create a binding contract, in which case, once a contract is concluded, no new condition can be unilaterally imposed by one party on the other without the agreement of both.

If you think you may have a case in accordance with the above, I would suggest you get your solicitors to write to the other party on your behalf. Even if they are unable to establish liability, your solicitors may still be able to bring some pressure to bear on the party concerned not to insist on the condition it is seeking to impose before handing over the cash. This is particularly the case if you can show reliance on its pledge by having entered into commitments of the kind contemplated by the promise of sponsorship before the new condition was sought to be imposed.

First published February 1996