On 27 December 2012, the club terminated Mr Berg’s contract. Mr Berg argued that he was entitled to £2.25 million, being the salary due to him for the balance of the fixed term. The claim was initially admitted by the club, who then subsequently sought permission to withdraw that admission. Permission would only be granted if the club had an arguable defence. Their defence was to argue that the clause was unenforceable as a penalty clause and that the person who entered into the agreement did not have authority to enter into a contract which had more than 12 months notice. ‘Straws’ and ‘clutching’ spring to mind.
- The clause could not be a penalty clause because it provided for a payment to Mr Berg in the event the club did something which it was entitled to do, ie terminate the agreement early. It was not a payment for breach of contract.
- Mr Berg negotiated his contract with the managing director of the club who had either implied or actual authority to enter into the agreement on its behalf.
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