We have said it before but it is worth repeating, get it in writing! Why? Because time and time again we are consulted by those who have contributed creative work unpaid to a start-up business with the promise of a reward of some kind which then does not materialise.
This week this same story has hit the papers again. Boohoo, the online fashion retailer that has seen a surge in revenue and profits is being sued by Richard Womack. Womack claims to have spent two years developing the Boohoo website when the business was just a fledgling, in return for the promise of a 10% stake in the business. Womack who sees himself as the ‘third founder’ claims responsibility for the design of the logo and look and feel of the site. His 10% share is he says now worth £118.5million. Millionaire founder Mahmud Kamani denies the claim and that any such offer was made to Womack and will no doubt be vigorously defending the claim.
Disputes of this kind are notoriously long-winded and costly if they reach the courts. The question for the court will be whether there is contract between Womack and Kamani. A binding contract must have certain ingredients. There must be an offer made by one person which was accepted by the other. There must be so called consideration, this is often money but need not be, the promise of shares is another common consideration in the world of start up businesses where money may be in short supply.
Finally there must be an intention to create legal relations. In other words did the parties in their discussion intend that their agreement be a binding legal contract. Where there is nothing in writing whether these ingredients are present will likely depend on the oral evidence of the parties in court and under cross examination. The result can be unpredictable and lawyers tend to discourage bringing proceedings in these cases as the prospects of success are less where there is nothing in wiring to back up the claim.
A simple one page document setting out the fact that Womack was working to create the Boohoo website in return for a 10% stake in the Boohoo business, signed by both parties would make this a very different case. It would have cost Womack nothing to create this one pager himself and ask Kamani to sign. For some reason he did not. The danger is a judge will decide that he did not because no such promise was made. We may know more once these two men have spent a good deal of time and money fighting it out.
Meanwhile, get it in writing. Better still and particularly if you seem unable to get it in wiring consult Briffa so we can help you make sure you get a just reward for the work you do.
Written by Margaret Briffa, Solicitor