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Legal Eagle

Contracts

Q: Verbal contracts and compensation

The leasehold on one of the venues that had booked my touring show is being sold. I had a verbal agreement, but the venue has already been selling tickets for the show. Yet the buyer says he will not have to honour existing contracts, while the existing management says recompense is not its responsibility either, because it has been 'forced' to sell by the (local authority) freeholder. Do I merit compensation and, if so, from whom?

A: As I have said in this column many times before, a verbal contract, with certain limited exceptions which do not apply here (such as contracts relating to land and guarantees), is every bit as legally enforceable as a written one, the only difference being that the existence and precise terms of a verbal agreement are evidentially more difficult to prove than an agreement which is evidenced in writing. The burden of proof in a civil case is on the balance of probability, and falls on the person seeking to rely on the contract. All the essential terms of the alleged contract must be established or it will be unenforceable due to uncertainty. In your case the fact that the 'venue' (presumably the party you refer to as the 'existing management') has been selling tickets for your show (presumably within the agreed booking dates) is very persuasive evidence to support the existence of a binding contract.

Your contract seems to have been with the 'existing management', in which case that is the only party who is liable to you, and not the 'buyer' of the lease of the venue concerned. The only glimmer of a possible defence which comes to mind in the circumstances which you describe is if performance of the contract by the venue manager were to have been frustrated by being rendered impossible due to some subsequent supervening, extraneous event which could not have been foreseen at the time the contract was made and was not self-induced. A pertinent example would be the issue of a compulsory purchase order by a local authority, but you seem to be referring to a sale to a third party other than the local authority, and if the lease was being sold in order to pay off arrears of rent or otherwise alleviate financial pressure on the existing management, that would be regarded as self-induced, in which case the doctrine of frustration would not apply.

If you succeed in satisfying a court on the balance of probability as to the terms of the verbal contract on which you rely, then any breach by the other contracting party in refusing to honour such terms will entitle you to damages, amounting to your financial loss flowing from the breach. If, as I imagine is likely to have been the case, you were to be paid a fixed fee per performance, or a share of box office receipts with a guaranteed minimum, then that will be the starting point for calculating your loss. It might be necessary to make a reasonable estimate of likely box office receipts, and you will have to give credit for the cost to you of putting on the production at the venue and for the booking period concerned. In effect, you will need to put forward a reasoned calculation of your loss of profit resulting from cancellation of the booking.

It does not stop there, because you have a duty in law to take reasonable steps to mitigate your loss, eg by trying to fill the booking period at another venue, and giving credit for any resulting profit against your claim for the loss resulting from the cancelled booking. You might even by this means wipe out your loss altogether, in which case you would be entitled to nothing from the cancelled booking other than nominal damages, and you might well find an order made against you for the other party's legal costs.

The first step therefore is to try to replace the cancelled booking, and meanwhile put the offending party on notice of your intention to pursue a claim against it if you fail to recoup your losses elsewhere.

First published 9th June 2005