Tony v Julian
Julian was the owner of a small advertising agency, ‘JCS’, with offices in Soho and an enviable list of clients. Still, even though the agency was well known and had two excellent creative teams, Julian was a poor businessman and JCS was not doing well financially. He decided, therefore, to sell the agency and let it be known in advertising circles that he was looking for a buyer.
Julian started discussing the sale with five different possible buyers, one of whom was his godson, Tony. Early in the negotiations, he explained that in recent years the turnover had been around £10 million per year and the net profit was £1million per year. He also stated that he had decided to move to San Francisco and would therefore hand over all his existing clients to whoever bought the business.
Eventually, after Julian had spent several months on exhausting negotiations, only Tony and one other possible purchaser remained interested in pursuing the matter. Julian rang Tony and told him that although he had decided on no account to sell the business for less than £4 million, he would make a special deal for him as he was his godson and he could have it for £3 million if he made up his mind in two days – otherwise it would be £4 million. Tony was both pleased and flustered at having to decide so quickly and, as it was a weekend, and he could, therefore, have no access to professional advice. He thought it was too good a chance to miss, however, and rang Julian on the Sunday night to accept his offer to buy at the agreed price. They later signed a formal contract which described the premises and the business, gave the price as £3 million, and included the following clause:
“Clause 14 Entire Agreement The parties agree that these terms and conditions (together with any other terms and conditions expressly incorporated in the Contract) represent the entire agreement between the parties relating to the sale and purchase of JCS and that no statement or representations made by either party have been relied upon by the other in agreeing to enter into the Contract.”
Julian offered to show Tony the accounts but Tony, thinking it would be too embarrassing to give the impression that he did not trust his godfather, declined. The sale was completed and Tony was very pleased to have his own business, at last. Very soon, however, it became clear that the annual turnover was going to be far less than £10 million and that he would be likely to make a net profit of around £400,000 per year, at the most. To make matters worse, after six months, Julian opened another agency on the other side of Soho and his old clients gradually left Tony for Julian.
In desperation, Tony had to sell the business and could get no more than £900,000. He can demonstrate, however, that if he had bought for a similar sum another agency in the area, instead of JCS, he would have made a net profit of around £800,000 per annum.
- Evaluate the cause of actions that might be available to Tony.
- Advise Tony of the likelihood of his success.
