Thoughts and insights from our Corporate & Commercial team
Jeddi v Sotheby's and others: a reminder of the risks of oral agreements
- AuthorEmily Wilson
It is an all too familiar narrative starting with a person claiming to have fallen out with a business partner, supplier or contractor and not knowing what to do next. It inevitably turns out that neither party saw the need nor had the inclination to document their arrangement. This is not a situation you would want to be in, particularly when there is a £12 million asset at stake.
Last month the High Court handed down its judgement in Jeddi v Sotheby’s and others. The case, concerning the ownership of a £12 million early Islamic rock crystal jar (the “Jar”), highlights the importance of recording commercial transactions by way of a written contract.
The case concerned two competing claims to ownership of the Jar.
The first was from Mr Jeddi. He claimed to be the sole owner of the Jar, having purchased it for $150,000 from an Iranian antique dealer in 2010. It was purchased by oral agreement, which was subsequently documented by a bill of sale. In 2012, Mr Jeddi asked Mr Pishvaie to act as his agent and consign the Jar to Sotheby’s in London for auction. This was evidenced by a handwritten note. On Mr Jeddi’s account, the proceeds of sale were to be shared 75% to him and 25% to Mr Pishvaie, with Mr Jeddi remaining the sole owner.
The second claim was from Mr Pishvaie who argued that the Jar was co-owned by him (25%) and Mr Jeddi (75%). Mr Pishvaie claimed that the Jar came from his father’s collection. It had been brought to Europe in 1968 and was recorded in a 1969 inventory, allegedly written by his lawyer in pencil on a scrap of notepaper. Mr Pishvaie argued that in 2010 he acquired a bronze statue from Mr Jeddi and in return he gave Mr Jeddi 75% ownership of the Jar, with Mr Pishvaie retaining 25% ownership. Mr Pishvaie’s case was that, in 2012 it was agreed between both parties that the Jar be deposited to Sotheby’s for sale at auction.
The dispute came to a head when Mr Jeddi informed Sotheby’s that he was the sole owner of the Jar and demanded that the Jar be returned to him. When Sotheby’s attempted to verify Mr Jeddi’s position with Mr Pishvaie, he claimed that Mr Jeddi’s assertions were false and that the Jar was in fact his.
Each side accused the other of fabricating documents and deliberately lying to the Court. As Mr Jeddi’s and Mr Pishvaie’s factual accounts directly contradicted each other, the ultimate issue for the Court to rule on was which side had the more credible story.
Having considered the oral and documentary evidence, the Court came to the conclusion that Mr Pishvaie’s case was unconvincing. The Court stated that Mr Pishvaie’s account of the exchange of the Jar with the bronze statue was implausible and un-evidenced. The Court also concluded that, on the balance of probabilities, the 1969 inventory was a forgery. The Court therefore ruled that Mr Pishvaie did not have 25% ownership in the Jar.
The case emphasises the inherent risks of relying on oral agreements. These “arrangements” unavoidably become a game of “she said, he said”, with the Court having to decide which side presents the more believable story. Ultimately they end up leading to the one thing every commercial solicitor hates; uncertainty.
By contrast, a well drafted contract documenting a commercial agreement reduces ambiguity and clearly sets out each party’s rights and obligations. This minimises the risk of a dispute arising as parties are able to point to express terms within the contract. This in turn diminishes the risk of that the dispute escalating to litigation.
The initial expenditure incurred by getting a written contract in place is well worth it and can often pale into insignificance when compared with the amount parties could be exposed to in the event of a dispute.