Winlink Marketing Ltd (Winlink), is an intermediary whose business involves introducing sports rights holders to commercial entities. Winklink entered into an introduction agreement with Liverpool Football Club & Athletic Grounds Limited (Liverpool) whereby it agreed to introduce Liverpool to a sponsor in return for commission where Liverpool signed a sponsorship agreement with that sponsor (Introduction Agreement).
In 2016, Liverpool entered into a global sponsorship agreement with the betting company BetVictor, whereby BetVictor would sponsor Liverpool’s training kit and a number of associated advertising opportunities (Sponsorship Agreement). Winlink initiated proceedings before the High Court of England and Wales (Court) against Liverpool FC (Liverpool case) claiming was that it was entitled to commission on the Sponsorship Agreement pursuant to the Introduction Agreement.
‘Effective cause’ of the deal
The Court initially found that there was no defined “introduction period”, a period of time during which Winklink would be entitled to commission, in the Introduction Agreement. In the absence of a defined introduction period, the Court held that the Introduction Agreement had an implied term that required Winlink’s “introduction” to be an “effective cause” of the Sponsorship Agreement. This meant that to recover the commission claimed, Winlink would have to demonstrate that it was the “effective cause” of Liverpool entering into the Sponsorship Agreement with BetVictor.
Winlink introduced Liverpool to BetVictor in 2013, culminating in BetVictor making an offer of £800,000 – £900,000 per annum to be Liverpool’s betting partner. A further offer was made by BetVictor in 2015 for advertising time on Liverpool’s LED hoardings, which was rejected by Liverpool.
Ms Raffaella Valentino joined Liverpool as a marketing executive in 2016 and initiated contact with BetVictor with a view to agreeing a sponsorship deal for Liverpool. The Court accepted that Ms Valentino had built up the long standing and strong commercial relationship with BetVictor’s then Chief Executive Officer (CEO), when she had worked with Manchester United Football Club and with Targeted Regional Marketing Limited, where she had a role in negotiating BetVictor’s sponsorship of Chelsea Football Club.
The Sponsorship Agreement between Liverpool and BetVictor involved BetVictor acting as a principal partner where it would sponsor Liverpool’s training kit with a number of associated advertising opportunities, including a full spread of exposure on “pretty much everything generated by Liverpool other than the first team shirt”. In contrast, the proposals brokered by Winlink involved a betting partnership or advertising for a short period of time during matches on LED hoardings. Evidence given by an industry expert illustrated the difference between the Sponsorship Agreement and what was proposed by Winlink: Liverpool’s training kit sponsorship was sold for £9m in 2020, while the betting sponsorship was sold for £5m.
The Court ruled that the Introduction Agreement lacked commercial coherence and held that it had an implied term whereby Winlink’s “introduction” to BetVictor had to be an “effective cause” of the Sponsorship Agreement to be entitled to commission.
In rejecting Winlink’s claim, the Court held that the effective cause of the Sponsorship Agreement was the long standing and close relationship between Ms Valentino and BetVictor’s CEO and not any action taken by Winlink. It also held that the bargain on offer in the Sponsorship Agreement was of a completely different magnitude than the transactions proposed by Winlink.
Contractual Interpretation in Ireland
In Ireland, contractual terms will be construed objectively according to the plain and ordinary meaning of the words contained in it. However, the Irish courts may imply a term into a contract in order to deal with a failure by the parties to include something of intrinsic importance. Terms will be implied based on the presumed intention of the party.
The Court in the Liverpool case relied on the “business efficacy” test, such that terms will be implied where necessary to give the contract business efficacy and without which the contract would lack commercial or practical coherence. This test has been approved by the Irish Supreme Court in Tradax (Ireland) Ltd v Irish Grain Board IR 1. The court may imply a term in order to give a contract “business efficacy” in the context of the presumed intention of both parties. If presented with the facts in the Liverpool case, it is likely that an Irish court would have come to the same conclusion as the English Court in applying the business efficacy test.
In considering whether to imply a term into a contract, the Irish courts will not just consider the business efficacy test, they can apply the “officious bystander test”, whereby if a term is so obvious that it goes without saying that the bargain is subject to this unstated term then it will be included in the contract. If a case similar to the Liverpool case arose in Ireland, it would be interesting to see how an Irish court would apply this test.
Although Liverpool ultimately succeeded in defending this claim, the case illustrates the significance for commercial entities of including carefully defined key terms, such as time periods, in any commercial agreement. Otherwise, there is a risk that a court may imply a term which objectively appears obvious to it at a later date, but which may not have been in the contemplation of one of the parties at the time the contract was entered into. If Liverpool adequately defined the applicable time period during which Winlink could claim commission in the Introduction Agreement, it would not have been forced to defend the case.
This case serves as useful reminder to commercial entities of the importance of contractual certainty. Clear contractual terms which expressly define key terms will add much needed protections to prospective commercial parties.
Contributed by Patrick Murphy and Laura Flanagan