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Legally Binding Contracts

By: Garry Crystal - Updated: 5 Apr 2017 | comments*Discuss
 
Legally Binding Contracts

Although it is usually the wisest option, legally binding contracts do not just apply to contracts set out in writing. Under the eyes of the law verbal contracts are just as legally binding as written contracts. A contract is basically an agreement between two parties, for example, one party supplies a service and the other pays for it. Regardless of whether this contract is set down in writing or verbally it is still a binding contract under law.

Formation of a Contract

There are two basic rules to the formation of a legal contract; offer and acceptance. One party makes an offer or agreement to provide a service and the other party accepts the offer. By setting out the terms and conditions of offer and acceptance a legally binding contract has been made. If the contract is broken, or breached, then the law can used to enforce the contract.

Consideration and Intention

Consideration and intention are two other factors that make up a legally binding contract. Consideration is usually the exchange of something, such as wages for work with an employment contract. Intention is where both parties make a contract with the intention of that contract to be legally binding. These terms are used more in common law and may not hold any weight if a dispute reaches the law courts. If a dispute does reach the law courts then a judge will be looking closely at the terms and conditions of the contract in practice.

Legally Binding Contracts

Many people are unaware of the various ways that legally binding contracts can be set down. By far the best way of making a contract is for both parties to sit down and draft up a contract in writing with all the terms and conditions laid out. In today’s world there are many different forms of communication options, and emails, faxes, and telephone call agreements for exchange of services are all considered legally binding contracts. As long as an offer and acceptance is made or implied then any breach of contract can be legally disputed.

Unfair Terms of Contract

Although the contracts described above are legally binding, it does not mean that there is absolutely no way out of a legally binding contract. The terms and conditions set out in a contract are of paramount importance when disputes reach the legal courts. Where consumers are concerned, unfair contract terms and a lack of good faith on behalf of the trader may mean that the contract is not legally binding.

The basic rule as to what constitutes an unfair contract term is that there is a significant imbalance in the terms towards one of the parties’ rights and obligations. This imbalance will usually be detrimental to the consumer, and the trader will usually have shown a lack of good faith and will not have acted openly or fairly towards the consumer.

Types of Legally Binding Contracts

Many of us are unaware that we enter into legally binding contracts every day. The simple act of purchasing food from a shop is a legally binding contract between shop owner and consumer. Having dental work undertaken is a legally binding contract, a simple agreement to have someone cut the grass in your garden for some form of payment is a legally binding contract. Disputes usually occur when one person decides not to honour one or more of the terms of the agreement. There are certain contracts that under the law do need to be set out in writing; these will include contracts such as the sale of property, shares, and intellectual property rights.

Certainty of a Contract

If a contract issue does reach the law courts then there must be a certainty of contract. This means that for the contract to be legally binding it cannot be vague or ambiguous. The terms and conditions must have been clearly set out in fact and not just in principle. A judge may look at unclear terms and then try and clarify them but this will be dependant on the individual case appearing before the court.

Legally binding contracts are used by people every day. There are laws set out regarding legally binding contracts in order to protect both parties involved in the contract. Legal disputes can be long and costly, and breaching a contract is a serious matter that should never be taken lightly.

One interesting question is 'does a text message create a legally binding contract?'. Richard Brittle of Brittle Motors based in Stoke-on-Trent believes that it does. Over the coming weeks our leading in-house barrister will report on her findings which should make for interesting reading.

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[Add a Comment]
Arw - Your Question:
I had an endowment mortgage that I started nearly 25 years ago and when I bought it, I included on the application form that I required £36,000 minimum and actually wrote minimum alongside the figure at the time of the signing. The seller then decided the payments and I have never missed a payment, About seven years into the payments, then came the endowment shortfall saga that was widely publicised and I started getting the warning letters. I put the company on notice for them to make up any shortfall. As far as I was concerned that word minimum was written into the contract and accepted by both parties.The company told me disagrred and gave me a final letter many years ago. I am looking to take this to the financial ombudsman when I get the final maturity figure this year so that I can place a figure on any shortfall. Unable to do this earlier because I didn't know if there was actually going to be a shortfall and also what the shortfall was going to be.What are my chances of success of claiming the full £36,000 by claiming that at the time of the application, my term "£36,000 minimum" was written into the contract and they took seven years of payments before trying to tell me there was going to be a shortfall.

Our Response:
Please see the Money Advice Service link here which will tell you all you need to know.
ContractsAndAgreements - 5-Apr-17 @ 12:53 PM
I had an endowment mortgage that I started nearly 25 years ago and when I bought it, I included on the application form that I required £36,000 minimum and actually wrote minimum alongside the figure at the time of the signing. The seller then decided the payments and I have never missed a payment, About seven years into the payments, then came the endowment shortfall saga that was widely publicised and I started getting the warning letters. I put the company on notice for them to make up any shortfall. As far as I was concerned that word minimum was written into the contract and accepted by both parties. The company told me disagrred and gave me a final letter many years ago. I am looking to take this to the financial ombudsman when I get the final maturity figure this year so that I can place a figure on any shortfall. Unable to do this earlier because I didn't know if there was actually going to be a shortfall and also what the shortfall was going to be. What are my chances of success of claiming the full £36,000 by claiming that at the time of the application, my term "£36,000 minimum" was written into the contract and they took seven years of payments before trying to tell me there was going to be a shortfall.
Arw - 5-Apr-17 @ 12:47 AM
I am currently in court with a client of mine, I sent a quotation and my terms and conditions are set out below our quote, we completed the works and are now in dispute. My questions are I do not require a signature on our T&Cs, they are just presented under the quotation, are they still valid? My T&Cs have been broken many times, but I have a contract sent via email to the client but I am worried in assuming that because they accepted our quotation does this mean they accepted our terms and conditions
Chris - 16-Mar-17 @ 7:52 AM
J - Your Question:
I broke up with an ex 10 years ago but he owed me money. He's recently been in touch and he agreed over facebook messages that he would repay this debt. Now he's saying he won't and that I gave the money to him. Can I pursue this debt? Is it worthwhile in terms of court and legal fees as he owes £2,000

Our Response:
If you're going to take court action, you must do this within certain time limits. The time limit depends on what action you're taking - eg the time limit for breach of contract is six years. You can see the CAB link here for further information and/or contact your nearest Citizens Advice to find out more about time limits.
ContractsAndAgreements - 2-Mar-17 @ 12:20 PM
I broke up with an ex 10 years ago but he owed me money. He's recently been in touch and he agreed over facebook messages that he would repay this debt. Now he's saying he won't and that I gave the money to him. Can I pursue this debt? Is it worthwhile in terms of court and legal fees as he owes £2,000
J - 1-Mar-17 @ 1:38 PM
I have a signed contract stating that i would help a a woman in her preparation,planning and successful opening of her restaurant. I was given 19 days to get it done and believe me as a qualified chef and with a business management degree i have never seen a kitchen in such an awful state, it was horrific. To cut a long story short i got the place open and involved the EHO and food standards agency and satsfied all the health and safety board. The contract stated i would help them specifically with the (preparation,planning and successful opening of her restaurant) which i did and many comments on facebook by her, messages to her friends and family, a good rating by the food standards agency and all legal requirements carried out including that of the Eho and licencing authority. The signed contract was that in return my fee of £7500 plus vat and any other payments i have had to pay in course of my contract would be paid by the client. I have also go a text message stating how happy they are with my work four weeks after i left and that if i could send them a summary of plan to move forward with they would settle my bill which still stands at £6250. I have tried to contact them but they have now said they are seeking legal advice and the company who i outsourced to retrieve my money have come back and said whilst they dispute the monies owed they cannot help me.... I can pay £410 and go to a small claims court but is there anything i should be aware off or can do as i feel the work i carried out with a total of 450 hours over 25 days was deserved of the feee i charged. Any advice would be amazing as i am a small business being crippled by this woman and he non payment
ashlaw125 - 20-Feb-17 @ 4:08 PM
I have a signed contract stating that i would help a a woman in her preparation,planning and successful opening of her restaurant. I was given 19 days to get it done and believe me as a qualified chef and with a business management degree i have never seen a kitchen in such an awful state, it was horrific. To cut a long story short i got the place open and involved the EHO and food standards agency and satsfied all the health and safety board. The contract stated i would help them specifically with the (preparation,planning and successful opening of her restaurant) which i did and many comments on facebook by her, messages to her friends and family, a good rating by the food standards agency and all legal requirements carried out including that of the Eho and licencing authority. The signed contract was that in return my fee of £7500 plus vat and any other payments i have had to pay in course of my contract would be paid by the client. I have also go a text message stating how happy they are with my work four weeks after i left and that if i could send them a summary of plan to move forward with they would settle my bill which still stands at £6250. I have tried to contact them but they have now said they are seeking legal advice and the company who i outsourced to retrieve my money have come back and said whilst they dispute the monies owed they cannot help me.... I can pay £410 and go to a small claims court but is there anything i should be aware off or can do as i feel the work i carried out with a total of 450 hours over 25 days was deserved of the feee i charged. Any advice would be amazing as i am a small business being crippled by this woman and he non payment
ashlaw125 - 20-Feb-17 @ 3:32 PM
Hi, I have a very similar problem to Luckybeme posted on the 14th July last year. Yesterday I bought a car from a recognised dealer. The price was agreed by both parties, contracts signed, deposit paid and collection date organised. They have phoned me this morning to say they have made a mistake and they can't sell me the car at the agreed price. They have offered me the deposit back but I feel I should be able to purchase the car at this price. Where do I stand legally please?
LK - 13-Feb-17 @ 7:42 PM
@CeebeeI would send him another letter telling him he is not to plaster and if he does he will not be paid for the job and also you will take him to court for damages if he goes ahead.
HughS - 8-Dec-16 @ 12:16 PM
November 20 the tenant renting my hse decides he can plaster a dining room he is renovating. He is not a trained plaster and has limited experience. I texted him I would pay him $1200. To plaster. It is now December 7 and he will soon beready to plaster. I texted him today and told him I would rather bring in a professional plaster . Based on his limited experience and it is a LG room. He responded with he is going to plaster. I asked him not to proceed and responded he is still going to plaster. So if he plasters am I on the hook for 1200 even though I told him not to proceed.
Ceebee - 8-Dec-16 @ 2:02 AM
I recently went into an SCS store to purchase a sofa on finance after being rejected for finance the store asked for a £20 deposit to hold my product so I could collect the sofa once I had paid the full amount off. After less than a week after paying the £20 I decided I no longer wanted the sofa so asked to cancel after paying them another £40. I only signed a form for finance. However now I'm been told I've entered a legally binded contact and cancel. Although the stores terms and conditions were never disclosed to myself and I didn't sign any contract with them other than to say all the details I had given were correct. What can I do to retrieve my £60 from them.
Shannon - 10-Nov-16 @ 7:51 PM
After being in building business for 28 yrs. i would says not a chance in hell, mark it down as a learning experince, and yuor taxes. Don't waste good time when you could be using that time to create some else better.
bozer55 - 9-Nov-16 @ 7:38 PM
In February a land developer approached me regarding developing spare land in my back garden. I was interested providing I did not incur any expense upfront. I stated this in writing and the developer agreed in writing to this request. We then agreed basic terms end April to prepare an option agreement - to allow him to submit a planning application and exercise the option if approval was obtained.When the heads of terms were formally issued though it stated my legal fees would not be paid for the option agreement until after it had been signed. I queried the developer on this (in writing) saying it exposed me to costs. The develop assured me – unfortunately by phone – that it was written like this because I might unilaterally walk away before the agreement was signed (in which case they would not want to pay for my fees).I asked about the converse ie the developer unilaterally walking away. They assured me this wasn’t going to happen since they wanted the agreement to progress the planning without full commitment to land purchase.Since the agreement was already half-way finished I accepted that verbal feedback. From June until September though the developer slowed down the completion of the option agreement –for reasons known only to the developer. At the end of September with the agreement in final draft form (ie all the legal expenses having occurred - £1800) the developer unilaterally walked away, and has since refused to pay my legal fees.Do you think there is any possibility of winning a claim against the developer due to prior commitments and intentions made - both written and verbal?
satnav padrone - 19-Oct-16 @ 4:26 PM
Hi. My daughter and I stayed in Bali last week and I was tricked cunningly into signing a contract for what they called a vacation allowance. It is for 12 years. Looking at it afterward I realized I may not be able to pay the exuberant resort fees for 12 years and when I asked about the cooling down period the next day they said there wasnt one and I could not break contract. lf I ever stop paying I would lose all money. I am so stressed and I cant sleep. I am on disability pension and have some mental disabilities and I feel I was tricked into it as it was my firsttime in Bali. Is there any hope for me? I have outlaid nearly 5k and have another 3k to pay plus $450 au to pay every year for 12 years. It is too much for me on a pension.please help. Yours sicerely Samantha Jane
Sam - 6-Oct-16 @ 11:01 PM
LizP - Your Question:
At the end of my 6 month tenancy I agreed via email to sign for another 12 months and paid a admin fee to the letting agent. However, I did not sign and return the contract they sent me. Due to a changing jobs, I am now wishing to move out of area and leave my current flat. Am I legally bound to pay for the rest of the 12 months even though I didn't sign a contract?

Our Response:
If you are still living in the flat and you verbally and via email agreed the extension to the contract and paid the fees, then it is likely you will still be legally bound by the contract regardless of whether it has been signed or not. If you want to leave the tenancy early, you would have to try to negotiate with the agency directly.
ContractsAndAgreements - 23-Sep-16 @ 11:48 AM
at the end of my 6 month tenancy I agreed via email to sign for another 12 months and paid a admin fee to the letting agent. However, I did not sign and return the contract they sent me. Due to a changing jobs, I am now wishing to move out of area and leave my current flat. Am I legally bound to pay for the rest of the 12 months even though I didn't sign a contract?
LizP - 22-Sep-16 @ 11:40 AM
The individual agreed to invest £250,000 in my company if he is granted Tier 1 Entrepreneur visa based on the investment in the company and business. Based on that, a business plan and agreement was prepared and the investor submitted it and was granted an entrepreneur visa based on it. After he was granted entrepreneur visa he did not invest any money coming up with various excuses although he has full funds readily available in their bank account. After about 8 months the investor applied for ILR and was granted IRL and then frankly told me "I have no intention of investing in the business". Can I enforce the agreement for the £250,000 investment to be made? The investor is a resident in the UK.
Bamboo - 6-Sep-16 @ 8:47 PM
@Hayley - while you are still under the contract then you still should have access to the paddock until the new oweners move in. But, if you are still being released from the contract early it might be a matter of sucking it up, as you are still legally obligated to the contract for the full term.Jess.
Jess80 - 1-Aug-16 @ 11:53 AM
I rented a horse paddock with a field and 3 stables. I had a year contract given to me which i signed. I sold one horse and wanted to loan the other one out. The farmer said she will find someone to take the paddock on and release me from my contract. 15th july she asked me to move my horses off the paddock up to her farm where she put them in a field which was miles away and impossible for me to get to my horse with my two children in tow. She also said my belongings were ok there for a couple of weeks, which indicated to me she had rented it out to someone as of 1st august. I decided to move my remaining horse to a yard which was more suitable and i was able to get to her with the children. The farmer has now asked me for an extra months rent on the paddock as the new people arent moving on until mid august. I dont see how this is fair as she moved me off the paddock 2 weeks ago. So as she has breeched her side of the contract as i have no stables etc is my side still valid?
Hayley - 31-Jul-16 @ 3:35 PM
If at the time of signing a contract you did not meet a fundamental term of that contract (i.e. be DBS cleared), is that contract legally binding?
Hannah - 23-Jul-16 @ 10:40 PM
I visited a used car dealership and was told by the salesmanthe price of a car which I test drove. I agreed with the offer and signed the vehicle order form and put down a deposit with a view of paying the remaining balance in 3 days time. On the third day I was contacted by dealership and informed there was a pricing error made and that the agreed price which i had signed would not be approved.Is this a breach of contract which is legally binding. Any advice would be greatly appreciated.
Luckybme - 14-Jul-16 @ 10:01 PM
I use a company to supply overalls, they collect them wash and bring them back ensuring there is always a clean set. I want to end the contract and I was told that I would have to pay 25% of the total value left in invoices if I leave early. This was in the terms and conditions. Every year when the contract gets to its renewal date it automatically renews unless I give notice 90days prior to the renewal date. The contract was renewed automatically without any input from me but the company are now saying the terms and conditions have changed and instead of paying 25% like mentioned before we now have to pay an early termination fee, plus a fee for the value left on the overalls. Is it legal for them to enforce the new terms and conditions on us when no one agreed to them? We did not accept them or even have them put to us for acceptance. Can a company change the terms and conditions and not tell you and expect you to abide by them?
DMC - 14-Jul-16 @ 9:29 AM
Sid - Your Question:
Hi, My wife and I, although happy and stable, would like to write out a contract that states that if we break up - God forbid - we will both have equal share of the time with our kids. I have had a very bad experience and as a result do not see my 8 yr old boy from a previous relationship and am simply not willing to go through that again. Is there any way and will it be worth the paper it is written if the need ever arises - which hopefully it won't. Many thanks in advance Sid Khan

Our Response:
Unfortunately, while you could make an agreement now, if you split up and circumstances and opinions change then any agreement made is not, as you say, worth the paper it is written on.
ContractsAndAgreements - 27-Jun-16 @ 1:52 PM
Hi, My wife and I, although happy and stable, would like to write out a contract that states that if we break up - God forbid - we will both have equal share of the time with our kids. I have had a very bad experience and as a result do not see my 8 yr old boy from a previous relationship and am simply not willing to go through that again. Is there any way and will it be worth the paper it is written if the need ever arises - which hopefully it won't. Many thanks in advance Sid Khan
Sid - 26-Jun-16 @ 10:54 PM
We have a catering trailer and have a verbal agreement with a retail store to rent a part of their car park area.We have rented for 3 years without missing a payment and have had no complaints.We have the initial email of the area manager asking us to set up there.How do we stand for breach of contract if they ask us to leave?
K - 24-Jun-16 @ 5:26 PM
I have recently lost £6000 via unauthorised transactions from my bank account.I followed all the correct procedures, reporting to police etc etc. The money was for a deposit on a house that I was in the process of purchasing. The fraud department informed me they would investigate which could take up to 5 days and then my money would be refunded.I felt this was unfair as I was the victim and I had concerns as I an agreement had been made to pay the deposit and complete the purchase on the property etc.As I was unhappy with the information I was given by the fraud team I decided to go into my local branch and ask for the manager.I discussed my situation in depth and the manager spoke to various departments looked into my account, confirmed it was clearly fraud and that the money would definatly be refunded into my account.The Branch manager provided me with this information in writing stating £6000 would be refunded within 5 days, apologising for my inconvenience and offering sympathy to me.The letter clearly details that this is a clear case of fraud etc etc.After the 5 days no money was refunded and I contacted the fraud team who advised me they were not refunding the money, no clear explanation provided.I explained I had the information relating to the refund in writing from the Branch Manager.I was told the branch manager did not have the authority to give me this information and that the letter meant nothing.Is there any legal rights if a bank agrees to refund in writing, can they then refuse to adhere the agreement they made in writing
rachel - 16-Jun-16 @ 10:05 AM
Hi I am a limited company. Just employing myself. I was working offshore through an agency. The agency sent me an agreement which mentioned a covenants agreement in one of the sections. They asked me to sign and return to them asap. Without explaining the contract to me.I asked them exactly what it meant.When they explained what it was I decided not to sign it and ignored it. I thought at the time it was very underhanded of them in the way they sent it. Now I have decided to work through a different agency and sent an email explaining this. They replied by saying that I was bound by the covenants section in the contract and that I couldn't work for anyone else for 3 months. This is ridiculous.
Kev - 3-Jun-16 @ 8:43 PM
nat - Your Question:
A firm of solicitors wont do the work as advised.Contract was signed by both myself and the firm.They say that the consultant that signed the contract with me was not qualified, or legally an expert.can you please give me some feed back on my rights.

Our Response:
Your solicitors office will have an in-house complaint procedure. You should in the first instance attempt to resolve your issue this way.
ContractsAndAgreements - 2-Jun-16 @ 12:14 PM
A firm of solicitors wont do the work as advised. Contract was signed by both myself and the firm. They say that the consultant that signed the contract with me was not qualified, or legally an expert. can you please give me some feed back on my rights.
nat - 1-Jun-16 @ 6:29 PM
Tezza - Your Question:
Hi, my friend is offering to loan me £3000 but is wanting a legal binding contract from a solicitor first. have you any idea how much a solicitor would charge for 1 of these doing??

Our Response:
Solicitors prices vary, therefore you would have to contact a solicitor directly. However, please be aware that any loan agreement fundamentally isn't worth the paper it's written on, whether it is through a solicitor or on an online template. If you default on the payment, the only option for your lender is to take you to court. All the piece of paper will prove is that the money has been lent and you have agreed to pay it back over a specific length of time. Any piece of paper can prove that, if it is signed by you.
ContractsAndAgreements - 1-Jun-16 @ 10:24 AM
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