A written contract between parties is insurance that both parties understand the obligations and ramifications of the work or services they will be exchanging. However, there are times when parties may have entered into a contract agreement, verbally or via email, in which one or both persons neglected to complete the contractual process via placing their signature on a written agreement – but what is the validity of unsigned contracts? Under these circumstances, issues can arise if either, or both parties, find themselves dissatisfied with the manner in which the contract is being carried out or if there has been a breach of contract agreement. This type of discord can result in parties refusing to proceed with the agreed upon terms, including payment for services rendered. Continue reading, if you require business legal support regarding this matter.
Initially, it is important to understand the elements of a binding contract. Those elements are:
- There must be an offer and acceptance of the terms of the contract
- The parties must exchange something of value, usually expressed in monetary terms
- The parties must intend to be bound by the terms of the agreement they are entering into
Understanding the validity of unsigned contracts
The elements that are noticeably missing include that the agreement must be in writing and signed by both parties. As such, it is possible to enter into a legally binding oral agreement or an agreement that can be inferred or implied by the actions of those involved. However, understanding the validity of unsigned contracts is another matter.
The safest and surest way to secure the terms of any contractual agreement is to have a written document where all involved parties can sign the contract. But in the event that there is no writing that is signed by the parties, what can a party look to for enforcing an agreement that they believe is legally binding; this element is often referred to as a “meeting of the minds.”
Did the parties exchange emails to the extent that it is reasonable to believe that all of the recipients of the emails understood they were agreeing to specific terms? The evidence would need to include information as to how the contract would be performed and the exchange of consideration between the parties.
Despite the lack of a written signed agreement did the parties begin to perform in a manner that would lead the court to believe that everyone understood their particular roles and responsibilities? For example, if Sam agreed to buy 1500 widgets and to proffer a deposit for the same, did Sam give over the deposit to the supplier? And, did the supplier accept Sam’s form of payment?
The Certainty of Expectations
Did the parties show a certain and expected understanding of the contracted terms? For example, John wanted his garage door painted. Joe went and bought the paint and painted half of the door. There would be little or no reason for Joe to invest in paint and time toward completing the job if John had not actually hired him to do so.
Negotiation of Terms – Is there evidence that the parties spoke with one another, including possible witnesses to the exchange, that reveal the parties intended to enter into a binding agreement?
While it is possible to enforce and obtain validity of unsigned contracts, the best possible option is to avoid any misunderstanding by carefully protecting yourself when you are in the process of negotiating for services or goods. Some of the ways in which you can ensure your interests are fully protected include;
- Any document drafted and passed between parties should indicate that the draft writing is not the final and enforceable document
- Clearly state to the other party that the agreement will not be binding until it is signed by all parties involved
- Do not begin the agreed upon act until you have a fully signed and enforceable agreement
- If any party begins any contractual action prior to signing the written agreement, notify the party immediately both verbally and in writing to cease all performance until there is an agreement signed by all parties involved
It is understandable that agreements between frequent business associates or friends may happen with fewer formalities and greater spontaneity, however, it is always risky to allow this to take place in the absence of a formal enforceable legal writing signed by all parties. And, while the risk is apparent to the business relationship, there is also a risk to the personal friendships that may have been developed over years of honest hard work together. Therefore, for the sake of preserving all of your business and personal friendships, it is always best to sit down and carefully outline and agree to the terms and conditions of any exchange that will involve the use of another’s services or the purchase of goods.
If you need assistance in ensuring the validity of unsigned contracts or require further business legal support please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Call us at your earliest convenience to schedule a consultation with the best commercial, family and immigration lawyers Sydney has on 1800 770 780.