Practical Contract Law

© Law2020 LLP 2013Practical Contract Law

Consequences of a contract dispute?

Management Time

Management Time

A lot of time!

Stress

Loss of a customer

Loss of a customer

For ever!

Reputational harm

Reputational harm

Loss of more customers?

And Lawyers are expensive

And Lawyers are expensive

Very expensive!

• You have a meeting with Alpha Services, a potential supplier

• You think it is a preliminary meeting

• You have a meeting with Alpha Services, a potential supplier

• You think it is a preliminary meeting

• You discuss the services to be supplied and the price

• You shake hands and leave

• You have a meeting with Alpha Services, a potential supplier

• You think it is a preliminary meeting

• You discuss the services to be supplied and the price

• You shake hands and leave

• Alpha Services then e-mails you saying:

“ I t i s g r e a t t o h a v e e n t e r e d a c o n t r a c t w i t h y o u ”

With which statement do you agree?

There cannot possibly be a contract as it was only a preliminary meeting

There cannot be a contract as we have not agreed all the terms

The may well be a contract

There may well be a contract

There may well be a contract

You might be legally-bound

Offer

Intention

Acceptance

Consideration

What is a contract?

Back to the meeting

At the meetingYou may have both made statementsA court might find that you have agreed certain terms

Back to the meeting

At the meetingYou may have both made statementsA court might find that you have agreed certain terms

A court might identify an offer and an acceptance

Back to the meeting

At the meetingYou may have both made statementsA court might find that you have agreed certain terms

A court might identify an offer and an acceptance

‘Consideration’ is a legal term for an exchange of promisesThe exchange of promises might amount to

consideration

Back to the meeting

At the meetingYou may have both made statementsA court might find that you have agreed certain terms

A court might identify an offer and an acceptance

‘Consideration’ is a legal term for an exchange of promisesThe exchange of promises might amount to

consideration

But did you intend to be legally-bound?

Intention?

In a commercial settingThere is a presumption that you intended to be legally-

boundYou will have to rebut the intention

Intention?

In a commercial settingThere is a presumption that you intended to be legally-

boundYou will have to rebut the intention

But surely you did not agree all the terms?A court may find that you have agreed sufficient terms

for a contract to come into existenceThe court may fill in the gaps

Intention?

In a commercial settingThere is a presumption that you intended to be legally-

boundYou will have to rebut the intention

Buy you did not agree all the terms?A court may find that you have agreed sufficient terms

for a contract to come into existenceThe court may fill in the gaps

So there may be a contract

There may be contract

What should you have done?

MAKE IT CLEAR THAT YOU DO NOT INTEND TO ENTER

LEGAL RELATIONS

These discussions are subject to contract

We do not intend to enter a contract until we have signed a final written agreement

These discussions are subject to contract

We do not intend to enter a contract until we have signed a final written agreement

Minutes of Meeting‘Subject to Contract’

These discussions are subject to contract

We do not intend to enter a contract until we have signed a final written agreement

Follow-up e-mail

and all other

correspondence

‘Subject to Contract’

These discussions are subject to contract

We do not intend to enter a contract until we have signed a final written agreement

DRAFT CONTRACTS

‘Subject to Contract’

These discussions are subject to contract

We do not intend to enter a contract until we have signed a final written agreement

ALLPRE-CONTRACT DOCUMENTS

‘Subject to Contract’

Another example• Alf tells a potential buyer that

“someone else is interested” in a machine that he is trying to sell– This is not true– The buyer purchases the

machine– Alf has made a fraudulent

misrepresentation

– This could prove very costly

• Alf tells a potential buyer that “someone else is interested” in a machine that he is trying to sell– This is not true– The buyer purchases the

machine– Alf has made a fraudulent

misrepresentation

– This could prove very costly

Another example

• In one recent case• Contract value was £48m• Liability cap was £30m• Fraudulent

misrepresentation!• Claim for over £700m• Settled for £319m

Simple steps can prevent problems arising

Train sales people in the

basics

Put simple

processes in place

Simple steps can prevent problems arising

Train sales people in the

basics

Put simple

processes in place

About us

We have been training lawyers and businesses

for 20 years

TRAINING

About us

We have been training lawyers and businesses

for 20 years

We train lawyers and businesses in English law

TRAINING

About us

We have been training lawyers and businesses

for 20 years

We are now designing effective e-learning on

practical contract law to complement our face-to-

face training

We train lawyers and businesses in English law

TRAINING

For more information

www.legalandcommercial.com

[email protected]