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INSIGHT: Contracts don't have to be in writing to be binding

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“You’ve got nothing in writing!”

“There’s no contract!”

“I didn’t sign a contract!”

There is a common misunderstanding that contracts must be in writing and signed by all parties to be legally binding. This is simply not the case: provided certain key elements can be shown, a binding contract might come into existence even without a written contract. If it does, the parties will be bound to deliver on their agreed arrangements.

What terms are needed for a contract to exist?

The key elements needed to form a contract are:

  • an offer (for example: “I can supply you with 10 boxes of paper”);
  • acceptance of that offer (“Thanks… I will take all 10” or “Please deliver them on Friday”);
  • consideration (“I will pay you £50 for those 10 boxes…” “That’s fine”);
  • an intention by both parties to form legal relations.

Where all these elements are present: offer, acceptance, consideration and intention to be bound, then there will be a contract - even if the terms are not recorded in writing. This is the case even if some terms are left out inadvertently.

If there are gaps in the contract, English law can step in to make the contract commercially viable by implying a set of unwritten terms into the contract. The rules about how these implied terms are applied have been established by the courts over a long period of time and can be quite unwieldy.

Avoid the “It’s your word against mine” scenario…

Without a written contract, arguments about what you have agreed can be difficult to resolve. If you have no written terms to rely on to prove the agreed scope of the arrangement, it will come down to an analysis of your word against another’s. This can often lead to unsatisfactory and often expensive disputes and legal proceedings. 

It is also frustrating for disputing parties when they realise they could have avoided the fuss and expense by drawing up a proper contract at the outset.

Get it in writing!

So – record your agreement in writing and, even better, draw up a formal contract. Bear in mind also, that you should record any changes to your contracts in writing too.

Tips for contracting with your trading partners

Contracting is part of every day business life.  It is worth spending some time on ensuring your contracts contain all the appropriate terms to protect you and your business.

For some tips on negotiating contracts, click here. You never know, they might just save you a few arguments in the future.

If you need advice on negotiating contracts, what terms to include or contract disputes, contact: 

Christopher Burke on 0161 684 6941 or email christopher.burke@pearsonlegal.co.uk

or

Aaron Marshall on 0161 785 3500 or email aaron.marshall@pearsonlegal.co.uk  

 

Also in this issue of Insight

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers LLP or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.