No Signed Contract? You Could Still Be Bound
If you’re busy you may find you often negotiate contracts quickly by e-mail. But what happens if despite e-mail negotiation, you never actually sign a written contract? Could you still be bound?
Generally a contract is only valid when it is signed by both parties. However, if both parties agree the terms of a contract, perhaps by e-mail, or even verbally, and both then act in a way that indicates an intention to accept the terms of this agreement, they might may find themselves bound to a contract.
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Is there an actual contract?
Under basic English law to be legally binding, a court will look to see if the following four aspects of any agreement are present
- an offer
- the clear acceptance of that offer
- consideration (i.e. the exchange of something of value by both parties e.g. services, goods or money
- the intent to create legal relations
Does a contract even need to be in writing?
You have probably heard the old saying that “an oral contract is not worth the paper it is written on”. But is it true?
Not necessarily. Provided there is absolutely clear evidence of both an agreement and that the agreement is being relied on by both parties, then there may indeed be a “contract” between them even if there is not actually anything in writing.
However oral and unsigned contracts are much harder to prove. Without something in writing indicating both the agreement and the terms, it may prove extremely difficult to establish a binding contract – especially if both parties disagree on what was actually agreed or said between them.
Watch out – contracts for transfer of land are treated differently
When it comes to any contract for the sale, transfer, option or lease of land, to make the agreement binding and effective, it must be both in writing and signed by both of the parties.
Is there anything else that can stop an unwritten or unsigned contract being enforced?
Yes, any court will want to be sure that any agreement was not made under fraud or duress, and that both parties had full legal mental capacity and that neither of them was a minor.
Entering into a contract accidentally? Our Top Tips To Keep Your Business Safe
- Make sure that every senior manager, director or a person with the ability to bind your business is aware that binding contracts can be created by exchange of e-mails.
- Clarify exactly who has the authority in your company to enter into contracts.
- If you don’t want to risk creating a binding contract, make sure that any e-mail or other correspondence, and even conversations, are expressed to be “subject to contract”.
- If you negotiate it by e-mail – keep the negotiation in one e-mail chain – this should save you having to hunt for e-mails at a later stage and should reduce the risk of accidentally agreeing to contractual terms by e-mail.
- Make sure your business has its own except contract or terms and conditions the supply of goods or services properly drafted by an experienced commercial lawyer
Click here to read more about the importance of well drafted terms and conditions for your business.
Click here to read more about how our specialist commercial lawyers can help you and your business.
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