WHILE SOME business transactions are quick and simple, many involve protracted negotiations as you shop around for the best provider of goods or services and negotiate hard to get the best terms and conditions.
“It is important to understand what makes a legally binding agreement and why additional safeguards may be needed,” says Tom Bodkin, a commercial solicitor with Borneo Martell Turner Coulston Solicitors in Northampton.
The five steps to forming a contract
English contract law sets out five requirements needed for a contract to be legally formed:
- An offer has to be made from one party to another;
- One party has to accept that offer, although there may be some counter offers before an acceptance takes place – for example, with negotiations on pricing or additional services;
- The price and payment terms for the goods or services needs to be agreed;
- There needs to be an intention between the two parties to enter into the contract;
- Any additional terms must be agreed between both parties.
A handshake or an oral agreement
It is possible to complete all the above five requirements orally and seal the deal, so to speak, with a handshake to represent the signatures and acceptance of the contract. However, there is an increased risk of conflict arising if the contract is broken, as a lack of written terms means the parties cannot be held accountable as easily.
How to ensure amendments to a contract are legally valid
The wording in the contract will determine how any amendments will become effective.
Usually a written contract will require agreement of both parties in writing, indicating that signatures of each party would be expected.
In a professionally drafted contract, the execution clauses provide important clarity. For example, if an execution clause states that the contract must be signed either electronically or in ink, it would be important to make clear whether the same method of signature or another method would be accepted by the parties for any future amendments to the contract.
How we can help
One way to always ensure that your business agreements are legally valid is to have them drafted or checked by a solicitor before you confirm your acceptance, and this will also ensure your business interests are protected.
For an informal discussion, please contact Tom Bodkin in the corporate and commercial team on 01604 622101 or email tom.bodkin@bmtclaw.co.uk
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
