Ipswich Solicitors

SMALL BUSINESS FAQS – SOLICITORS IPSWICH

Legally binding contracts

Legal contracts are created every day by hundreds of thousands of people. The simple act of purchasing food from a shop is a legally binding contract between the seller and consumer. Having your hair cut is a legally binding contract as is having your windows cleaned every now and again for some kind of payment. Disputes arise when one of the parties decides not to keep their side of the bargain and it is up to the courts to determine these disputes.

Contracts can either be written or oral. The law views both types of contracts in the same legally enforceable light. A contract is created where one party offers goods or services to another for consideration which is accepted and there was an intention to create legal relations.

Consideration and Intention

Two important elements that are needed to make up a legally binding contract are consideration and intention.

Both parties must intend for the contract to be legally binding. To discover this intention it is necessary to look at the parties conduct. If the parties have actually entered into a written agreement then this will be reasonably straightforward. If they haven’t then the court will look at the parties conduct to ascertain whether the agreement was meant to be legally binding.

Consideration is usually provided in monetary form in exchange for services of goods. For example, I will buy your car for £10,000. The £10,000 is the consideration in return for selling the car. However consideration does not need to be money. It can be a promise to do another service in return (like a barter exchange). You should also note that the consideration does not have to equate to the value of the goods or services being provided. A good example is landlords who lease out their premises for a peppercorn rent. The peppercorn is the consideration and a court will not question the value of the peppercorn compared to the value of the property being leased.

Unfair Terms of Contract

Not all terms in a written contract will be upheld by a court. If you are a consumer dealing with a business then if a onerous or unfair contract term is in a contract which the business wishes to enforce then a court may strike out the unfair term. When most consumers deal with business they are forced to accept the terms of contract put forward by the business. In these instances the court will use metaphorical scales to determine whether there is a significant imbalance as regards the terms of offer and acceptance. If the business has shown a lack of good faith to the detriment of the consumer then the scales are normally tipped by the court in favour of the consumer. A good example of such unfair clauses would be those relating to exclusion of liability and product quality.

Certainty of a Contract

All contracts should be professionally drawn up by lawyers to ensure that the contract is clear and that all parties to the agreement are certain what their obligations are.

If a contract comes before a court and the terms of the contract are ambiguous or unclear then the judge will interpret them in the way he considers they should have been intended. This is obviously not ideal so clear contracts should always be drafted in the first place.

The laws that regulate legally binding contracts are intended to protect both parties to a contract. Breaching a contract can be considered a serious matter and legal disputes are lengthy and expensive therefore the best approach is draft a clear and balanced contract from the outset.