Legally Binding Contracts

Author: Garry Crystal

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.

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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.

Your situation may be slightly different. ask a question below ↓ and our editorial team will reply with our advice.

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.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Contract Red Flag Checker lets you describe a contract you are about to sign and get a plain English summary of the clauses that could hurt you. Takes about 2 minutes. Try it now →

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Zero63 21/10/2020 at 12:44 pm

We purchased a property in 2019, our neighbour purchased their property in 2017.
2 months after moving in we were embroiled in a boundary dispute even though our plans and that of our neighbour match.
They suggest that a row of 4 bricks laid in the grass is the boundary and that they have been in place since around 1999, we have since found that the bricks were laid there innocently by the original owner to edge the grass and did not in anyway denote the boundary.
I have had a CPR35 report carried out by an expert witness and a land surveyor report which also confirms that the boundary is correct as per the conveyancing plan, our neighbour will still not back down.
Am I right in thinking that as we are both relatively new owners of these properties, that on exchange we agreed to the title deeds and plans as issued on during exchange, the bricks are a mere distraction and mean nothing?
I would add that the area is open plan, crosses a shared accessway which is further protected by covenants within the deeds of both properties.

abdul 26/08/2020 at 5:57 pm

I purchased a house in 1992 and made sales agreement and took mortgage for the house. It was bought from distant relative who were living before in this property. Later he became my tenant and went into tenancy agreement. I used to pay him monthly basis for some amount to repair my house, This amount used to be from housing benefit paid to my tenant. After paying my mortagage, the rest of amount left I used to give half of that amount to my tenant to maintain the house. One time I wrote a letter to him saying y are taking care of my house and y are my equal partner in this property before and after sale without any agreement. Just informal. Does it make a legal binding to me?

Art 28/01/2020 at 4:40 pm

I took admission for one of the beauty course in private beauty salon in London and paid half fees at the beaning and after a month remaining fees. When i started the person in charge who was salon owner was not teaching anything at all every time she will say just practice and do the submission. when it was time to give exam she transfers all students to some other lady's salon so we went there, they both had some finical problems and we did not know what to do.so after not giving exam we are asking for refund but she refused.We tried so many times to reach her she sold her salon and block all of us, we have no contact and do not know what to do it is already been year now. And we all paid huge amount to her. please help.

Thank you

Lulu 12/11/2019 at 8:27 pm

We have a person who wishes to renovate an old property that we own, but is not mortgageable yet. They can afford to carry out the renovation and then when it's up to mortgageable standard they wish to purchase it. Both parties are happy with this set-up, finances agreed, timing of project all conditions agreed.
Can we set out an agreement ourselves, all sign it and it would be legally binding if anything happened to either party during the renovation period.
We want the agreement really so both parties feel protected in the transaction.

Flower 12/06/2019 at 9:23 pm

My buissnes partner made me sighn a 50 50 joint ownership when I was majority shareholder how do I stand?

M 01/10/2018 at 7:38 pm

Hi. My ex partner took out finance on a car, at the time I agreed by text that I will help pay for this. Now we aren't together am I still liable to pay for this? To add she's denying me access to my son if I don't pay which I have in writing via text.

KB 18/09/2018 at 7:32 pm

My employee verbally acknowledge a service over the phone from an advertising agency, knowing nothing about it they are now saying I have to pay for the service and the charges for not paying on time. This employee has no access to business money and does not pay the bills, the agency called the pubs landline. Do I have to pay this?

Coops 23/08/2018 at 5:33 pm

I have a predicament with a past customer which I performed a job on there leather 3 piece suite, a colour change! The job was compromised when the gentleman sat on his chair earlier than advised and it peeled. They refused me to correct the issue and insisted if I gave them a full refund there would be no further action. This was printed out and both parties signed, they have now brought a new suite and want half the value or threatening small claims court? Any help be great... Thanks

tiger 15/08/2018 at 9:51 am

hi me and my partner are going through the process of dividing our house.she has told me by text message she would accept 50k ..would this be a law abiding ??

NN Editor 13/08/2018 at 10:12 am

@J - Someone has to be accountable for the agreement and that would be you or your employer.

ContractsAndAgreements Editor 07/08/2018 at 12:56 pm

As long as your partner can prove the money was a loan and the car was not a gift, he should have a case.

Barbara 06/08/2018 at 9:22 pm

So my partner had went and got his ex partner a car out in his name for her (well call her shiela) because she had bad credit they broke up and sheila was to pay so they set up a joint account sheila lodged money into that and the company withdrew it from that, sheila started missing payments and then stopped paying shiela was then caught drink driving, band and then driving whilst band etc the car was took from her , my partner had been sent a letter about the payments as off course the car still needed paying for, the company sold the car and there was an outstanding payment of a round £3000 still to be paid which was agreed to be paid by Sheila , she now refuses to pay anything. There is txts to prove the car was for her, that she was insured on it, she had been lodging payments into the joint account so it could be paid etc b ur she's saying there's no proof and that she won't hav to pay, if he takes her to court has he enough evidence indicating that the car was in fact for her and that sheila is infact due to pay for it?

ContractsAndAgreements Editor 23/07/2018 at 11:10 am

If the settlement money has changed hands and you wish to go back on your promise you can change your mind and/or ask your ex to reconsider. However, his option would be to apply to court if you refuse to sign the transfer of sale documentation. If it goes to court, please be aware that court and court representation will cost.

Sarah 21/07/2018 at 10:15 pm

My ex boyfriend and I own a house together, it is his intention to say in the house and buy my share. we agreed through text message late at night about figures. Which were then transferred. I feel I settled foolishly and would like to sell the house. Is the interaction and money transfer enough of a contact that I can’t change my mind?

Robb Editor 14/06/2018 at 10:37 am

@EO - you are trying to claim on a fragile technicality, I don't think you have much in the way of rights in this instance. They'll just say the cut-off point was midnight.

ContractsAndAgreements Editor 18/05/2018 at 2:21 pm

It is not legally binding, your father is entitled to change his mind.

Tori 17/05/2018 at 3:20 pm

Hi. I am 17. My parents are divorced and I have little contact with my father. He was asked by my mother in text message if he would contribute half of cost if my driving lessons. He declined but replied he would give me £240 towards cost which would be my birthday and christmas money. He now refuses to give me anything. Is it legally binding as it was all in text.

ContractsAndAgreements Editor 10/04/2018 at 12:35 pm

I am sorry to hear this. Unfortunately, there is little you can do with regards to this matter unless the lease was signed and exchanged. These are UK laws. However, if you live elsewhere in the world the laws may be different. In which case, as we are a UK-based site you may wish to seek further advice.

Gazza 09/04/2018 at 10:43 pm

After a longer-than-normal negotiation to let a house that was concurrently listed for rent and for sale, the owner of the property we were pursuing sent us a text message: "Hi, could not get hold of Hamptons towards end of day, but we are in agreement to move forwards i believe, have instructed house to come off market asap. Many thanks." The following day the letting agent followed up with paperwork and a request for a holding deposit, which we paid immediately. Based upon that chain of events, we started buying basic furnishings that were scheduled to be delivered starting one day after the agreed upon date to begin our tenancy. Two days prior to the start of the rental term, we were sent the lease to be executed electronically. But before all parties had signed signed it, the agent informed us that the owner had actually not withdrawn the property from the market as promised and had since agreed to sell it to another party. Do we have any redress to either (a) enforce the owner's promise to let to us or (b) receive compensatory damages beyond the return of our holding deposit?

Narelle 03/02/2018 at 10:38 pm

Hi, I booked a holiday through a well known site and paid a deposit, at the same time my friend booked the cottage next door. I then got a promotion at work which doesn’t entitle me to any holidays in the month I had booked the holiday. I have spent days now emailing the company that are trying to charge me a bigger deposit for a holiday that is 9 months away! I haven’t signed anything but because my friend isn’t cancelling they are saying they are now liable for the deposit! Please help, do I have to pay the larger amount? They keep saying it says it on the website but we didn’t use the website we rang an this was never explained to us (they also said they lost the recording of that call) thanks

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