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Fenchurch v AA (2023) – Contractual arrangement annulled through lack of consummation

Fenchurch Advisory Partners LLP v AA Ltd [2023] EWHC 108 (Comm)


This High Court case centred on a dispute over whether a contract was validly formed despite the lack of signed engagement letter. Its significance lies in confirming basic points of law regarding contract formation.

Judgment in this case was handed down on 24 January 2023. The judgment can be found online here.


Fenchurch Advisory Partners are a consultancy firm for investment banking and corporate finance who specialise in M&A in the insurance and financial services sector. The AA is the UK-based breakdown recovery service, trading as a public limited company, and owned by various private equity firms.

Fenchurch were negotiating with the AA to provide advice regarding a potential sale of the AA’s insurance division. An engagement letter (i.e. a legally binding contract) had been envisaged by both parties, but had not been drafted or signed. Extensive negotiations regarding contractual terms had been ongoing. Meanwhile, Fenchurch had carried out ‘hundreds of hours’ [judgment para. 51] of work on the project in the expectation that the AA would become a contracted client.

The two parties had reached an agreement over basic fees, as well as a ‘success fee’ in the event of a successful sale of the insurance division. This success fee would also be triggered in the event of a public offering. This ‘agreement’ consisted of the AA asking Fenchurch to confirm their fee details over email so that the final engagement letter could be drawn up, with Fenchurch duly replying to confirm. In the event, the AA was indeed offered to the public, which would trigger the same fee in the form of an ‘abort fee’. However, the engagement letter was not subsequently drawn up, and thus at no point was a contract physically or electronically signed.

Fenchurch argued that this email correspondence constituted a binding contract, entitling them to the success fee, while the AA argued that there had been no formal contract signed by both parties, so no contract was formed. If there was no contract formed, Fenchurch would then claim in restitution for unjust enrichment for the services they had provided to the AA (i.e. if there was no contract then they had essentially put in hundreds of hours work for free, and the AA would be better off by the sum that they would have ordinarily paid in fees for services rendered).


The Court acknowledged that both parties clearly intended to create legal relations, vital for contract formation. Similarly, fee details were considered an agreed material term by both parties. The lack of a signed agreement is not necessarily a fundamental issue, and email correspondence indicating agreement can in certain circumstances considered a contractual arrangement.

However, the conclusion of the fee discussion did not signal the completion of the contractual terms negotiations. There were other outstanding matters that not been solved between the counterparties at the time of the email correspondence, such as additional triggers for the success fee [120]. A Fenchurch executive during the process acknowledged that ‘whilst our engagement letter is c.99% agreed, it was never actually signed’ [149], and the AA’s interim CFO at the time also noted that ‘the deal was never legally consummated’ [150], using this as a justification for not paying Fenchurch their requested fee. While commercial terms had been agreed, there was still legal distance between the counterparties’ positions. Therefore, the Court held that, although there was a general intention to create legal relations, there was also an intention that there would not be a legal relationship until all terms were finalised, rather than merely the fee negotiation.

Although the primary judgment went the way of the AA, Fenchurch did receive compensation (£350,000) for the work they had put into the project, as the Court found in their favour on the unjust enrichment restitution claim. The Court acknowledged that Fenchurch took a risk regarding the success fee, but not with regards to the basic project fee [319]. The £350,000 figure was based on what a reasonable person would expect to pay for the services Fenchurch had provided to the AA.


It is a daily reality that firms undertake preparatory work in anticipation of contractual consummation. It is all well and good to suggest that, in order to avoid working for free, firms should avoid any serious work until an engagement letter is signed, but sadly commercial imperatives intervene. Sadly, as this legal agreement was never consummated, the underlying relationship was all too voidable. Something of a consolation for jilted counterparties is that the High Court was willing to award compensation for services already rendered, as one might expect, to avoid unjust enrichment. The judgment breaks no new ground, but does serve to reiterate the non-contractual status of prospective counterparties before the moment of signature.

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