The $18m Mistake: Why SMEs Must Formalise Agreements

This article was written for and published as original content in Business Time in Essex.

In the world of business, relationships often begin with a handshake or a phone call. But what happens when expectations aren’t clearly documented? A recent case offers a cautionary tale for businesses relying on informal agreements.

The Case: H&P Advisory Limited v Barrick Gold (Holdings) Limited

Earlier this year, I attended a LawNet seminar, hosted by Michael Twomey, where we discussed commercial contract updates. One area that caught my attention was the topic of oral agreements and unjust enrichment, specifically relating to the case of H&P Advisory Limited v Barrick Gold (Holdings) Limited.

H&P (Advisory) Limited (H&P), a boutique investment bank which provides advisory services, claimed it had provided financial advice to Barrick Gold (Holdings) Limited (Barrick Gold) during a merger that significantly benefited the mining giant. H&P sought over US$18 million in fees, claiming that an oral agreement had been made. Barrick Gold denied any agreement being made, arguing that no formal arrangement existed.

The court acknowledged that informal practices are common in investment banking, where firms often provide unpaid work hoping to secure future contracts. However, in this case, it was found that there was no evidence of a binding oral agreement.

Despite this, the court found merit in H&P’s alternative claim for unjust enrichment. On a quantum meruit basis (essentially, fair payment for services rendered), H&P was awarded US$2 million for the value it had provided.

Key lessons for businesses

1. Put it in writing

Clear communication is essential in any business relationship. Documenting a formal written agreement – whether it's between an advisor and client, or otherwise – will clarify the basis of your working together. Even following up a phone call with an email to outline what was discussed can be essential in reducing the risk of disputes.

Had H&P secured their position by agreeing a formal contract with Barrick Gold, their interest would have been better protected.

2. Ensure certainty

H&P were able to recover part of the disputed fee because the court recognised that they had provided value to Barrick Gold. However, relying on courts to recognise that value is risky. Instead, proactive documentation ensures that the benefits provided translate into the full reward, rather than leaving businesses reliant on uncertain legal remedies.

3. Mitigating risk

Risk is part of the game. It’s often said that there is “no risk without reward”. While the saying holds true, it makes business sense to mitigate risks where possible. Defining the terms of engagement at the outset is not merely best practice, it is essential for both legal and financial security. Clarify terms early and avoid assumptions.

Whether you're a marketing agency, tech startup, or construction firm, the principles of this case apply. Many SMEs operate on trust and informal arrangements, but as this case shows, trust alone isn’t enough in a legal dispute.

If your business regularly provides services without formal agreements, now is the time to review your practices. A well-drafted contract doesn’t just protect your interests – it builds professionalism and clarity. In an era of increasingly complex transactions, whether local or global, written agreements are not mere formalities, they are safeguards.

If you're unsure whether your current practices are legally sound, our Corporate and Commercial team at Thompson Smith and Puxon are here to help. We work with businesses across Essex to ensure their contracts are clear, enforceable, and tailored to their needs. Contact us today by calling 01206 574431 or by emailing enquiries@tsplegal.com.