In order to have a valid contract under English and Welsh Law, the following elements must be present:
- Offer;
- Acceptance;
- Consideration;
- Intention to create legal relations; and
- Certainty of terms.
Offer and acceptance are discussed in more detail below. Consideration is concerned with the concept of reciprocity. In other words, where someone takes the benefit of a contract, they must also give something in return. For example, if Party A agrees to supply goods to Party B, Party B must give something in return, such as a sum of money.
An intention to create legal relations simply means that all parties to the proposed contract wish to create a legally binding agreement and be bound by the terms of it.
As to certainty of terms, this principle establishes that the terms of the contract must be clear and unequivocal to both parties. All terms of the agreement must be finalised and there should not be any uncertainties or essential terms missing from the agreement.
An offer is effectively a promise to another party(ies) to contract on certain terms. This is to be distinguished from what is referred to an invitation to treat. An invitation to treat is simply an indication that a party is open to negotiate the terms of a possible contract. For example, a listing of the sale of a house through an agent’s website would be an invitation to treat. Here, the party offering the property for sale is indicating they would be willing to consider offers to purchase their property.
Acceptance is reached when a party agrees to the exact terms of the offer and intends to be bound by these terms. Acceptance can be made in writing, or orally. Further, it is possible to accept an offer by way of conduct.
It is possible to create a binding contract, by way of an oral agreement, provided the aforementioned elements are all present. However, it will be significantly harder to prove the existence and the terms of the contract, compared to if the contract was made in writing, given there is no written document recording the terms.
Whilst it would be prudent to ensure a contract has been validly signed/executed by both parties, it is possible for the contract to be effective, without one, or both parties needing to sign the contract.
One way by which the contract can become binding is by way of the conduct of the parties. If, after agreeing the terms of the contract, the parties act/conduct themselves in accordance with the terms of the contract, the contract can be deemed effective and binding on both parties.
By way of example, let us say Party C agrees to provide a shipment of goods to Party D, in return for a fixed sum of money. A contract is duly drawn up and agreed, but never signed. However, in accordance with the terms of the contract, Party C delivers the goods and Party D pays for them. Here, the contract has become effective, as a result of the parties acting in accordance with the terms of it.
It is possible for a written agreement to be created by email. This is provided that all elements of the contract are present, as set out above in question 1 and also, both parties acted in accordance with the terms agreed over email. However, problems may arise in proving the existence of certain terms of the contract, in lieu of a written document recording the terms.
If you have agreed to provide a service/supply goods, for a sum of money and the other party does not pay, then you may be able to bring a claim for breach of contract and/or a debt claim. Depending on the terms of the contract and the status of the work carried out, you may be entitled to cease work and sue for the sums owed to you.
In legal terms, the time limit in which you have to bring a claim is referred to as the limitation period. These time limits are set out in the Limitation Act 1980. The time limit to bring a contractual claim will depend on the type of contract and also, the type of claim.
Where the claim is for a breach of a simple contract, the time limit to bring the claim is 6 years from the date of breach. In other words, the time limit of 6 years runs from the date the party breached the terms of it. Where a contract is entered to as a deed (for example a long residential lease) the time limit to bring the claim is 12 years from the date of the breach of the deed.
In the case of a claim for fraud or mistake, the limitation period is slightly different. Here, the limitation period does not run from the date the fraud or mistake occurred. Rather, it runs from the date the potential claimant discovers, or could reasonably have discovered the potential fraud or mistake.
In this context, ‘remedy’ refers to the action you want the potential defendant to take/ for the court to order the defendant to take.
There are a number of remedies available for breach of contract, depending on the nature of the claim. If the claim is for an unpaid debt/a sum owed under the terms of the contract, then the most common remedy you would seek is payment of the sum of money. In legal terms, this is referred to as damages. The purpose of damages is to compensate a claimant, not to punish a defendant. Any award for damages seeks to put you in the position you would have been, had the other party not breached the contract.
In addition, or the alternative to seeking damages, it is possible to seek an order for specific performance. Here, you are trying to force the other party to perform their contractual obligations.
The contract may include terms dealing with remedies available, in the event there is a breach. Therefore, care must be taken to carefully review the contact.
An express term of the contract is one which is recorded in the written contract. In contrast, an implied term is not recorded in the contract. Implied terms can be incorporated into contracts, as a result of the following:
- By usage or custom (in that such terms are usually present in contracts of that type)
- By previous course of dealings;
- By looking at the intention of the parties;
- Terms implied by necessity by common law (in other words, as a result of a decision in a previous court decision); and
- Statute (legislation).
An entire agreement means that the written contract and the written contract alone includes all the terms and conditions the parties are bound by. If a term is not in the written contract, the entire agreement clause prevents the other party from seeking to rely on this term.
It is possible to exclude liability in certain, specific circumstances. The extent to which liability can be excluded will depend on the nature of the relationship between the parties. Greater protections are afforded to consumers when contracting with a business, compared to if the contract is between 2 businesses.
The extent to which liability can be excluded is subject to statutory constraints and also, related case law. It is never permissible to exclude liability for personal injury, or death, that has occurred as a result of a negligent action/omission.
