Home > Understanding Contracts > How to Interpret a Contract

How to Interpret a Contract

By: Lorna Elliott LLB (hons), Barrister - Updated: 21 Nov 2017 |
 
Contract Clauses Offer Acceptance

A contract is an agreement between parties that sets out their respective rights and obligations for the period that the agreement is in existence. There are certain elements that all contracts should have in order to be valid and legally binding. However, not all contracts are in writing and under English law there are a variety of contracts that can be made without being reduced to writing (for example, buying a newspaper from a stand outside a station.) Reading a legal document can be daunting but there are certain elements which are required to make a contract legally binding.

Intention To Form A Legal Relationship

This should be obvious in most contracts. There should be at least two parties, both of whom are capable of entering into a legally binding situation (e.g. a party cannot be a minor or certified insane.)

Consideration

This is in essence the distinguishing feature between a deed and a contract. In an agreement with two parties, both must provide ‘consideration’. In other words, both must contribute something within the contract. Sometimes, consideration can be nominal (e.g. a business which has considerable debts may be sold for the nominal value of £1).

Offer And Acceptance

In general, a contractual relationship will not have been formed unless there has been a offer specified by one party that has been accepted by the other. Partial acceptance is not sufficient, and will usually constitute a counter offer. Any counter offers will need to be agreed before the contract can be formed.

Certain Terms And Complete Agreement

Any ambiguity in the important terms of a contract is likely to make it unenforceable. For example, you cannot agree a contract of sale if there is no clearly defined price.

There should also not be any question that either party has been forced or pressured into making the contract, and the subject matter of the contract should not be illegal. For example, if A contracts with B to commit a criminal act, this is not legally binding.

What To Look For

There are certain questions you should ask yourself when reading through a contract. Look through the rights and obligations of both parties. Is everything that you have agreed included, and is there anything that you didn’t agree to? Is the price, or other ‘consideration’ clearly spelt out?

You must be able to establish the conditions for ending the contract too. Is there a notice period for terminating the contract? Does notice have to be given in writing? What happens if one party breaches the contract? Are there any clauses that look like a party is trying to avoid being liable for something? What are the procedures in case of a dispute? This can be important in relation to jurisdiction. If a dispute needs to be resolved in the courts, it will be much more expensive to sue abroad than if the agreement is governed by UK law.

Make sure that you understand everything that is required of you before you sign. If you are in any doubt, seek legal advice.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Kumar
    Re: What If I Don't Have a Written Contract With My Employer?
    Hi , I worked for 3 years for previous company( I am sacked now) . They have not given any…
    18 April 2019
  • Nogs
    Re: Contracts and Self Employment
    I am self employed gardener and have been working for the same school for over 12 years 3 days a week. Until they have reduced to…
    4 April 2019
  • Cstead
    Re: Contracts and Self Employment
    I’m self employed beauty therapist should I be responsible for my own insurance & who is responsible for risk assessment me or…
    1 April 2019
  • Mick1980
    Re: Breach of Contract
    ** Late ** in being paid. The QS was either sacked or quit and did not process our December Invoice for £25k.
    30 March 2019
  • Gal
    Re: Title Deeds: Who Keeps Them?
    I have a buyer for my mums house and we cannot find the deeds and it is not reg with the land reg. with have scgedulw of deeds and…
    28 March 2019
  • AlyMak
    Re: Employment Contracts Explained
    I am self employed and have been working for a self employed man that works for a top publishing company. It was agreed in June…
    25 March 2019
  • georgekennedy
    Re: The Law & Verbal Agreements
    My daughter, within the last three weeks has purchased a new motor car on finance. The car was purchased from an Arnold Clark…
    20 March 2019
  • Phil
    Re: Gym Contracts Explained
    Joined a leisure centre in the town I used to work because it was the same chain as another leisure centre in my town and the terms and…
    19 March 2019
  • Phil
    Re: Gym Contracts Explained
    Joined a leisure centre in the town I used to work because it was the same chain as another leisure centre in my town and the terms and…
    18 March 2019
  • Sub
    Re: Giving an Undertaking
    Hi. I hope some one can help me. My wife left with my son one day and took out a non molestation order on an ex parte basis against me. She…
    18 March 2019