What is a Contract?
At its simplest a contract is a bargain between parties. It is a promise to do something. It creates legal obligations. In the event of breach, it provides recourse and remedies (whether legal through court proceedings or non-legal thorough alternative methods of dispute resolution) for the aggrieved party.
The following are the key ingredients required to create a contract:
- The parties must have reached agreement (offer and acceptance).
- Both parties must have provided valuable consideration.
- The parties must intend to be legally bound.
An offer is a statement of willingness to contract on specific terms made with the intention that if accepted, it shall become a binding contract. Acceptance is an unconditional assent to all terms of the offer, made with the intention of accepting. Consideration is something of benefit to one party to the detriment of the other; consideration need not be of adequate value, but must be something of value. Finally, there is a presumption that the parties intended to create legal relations in their transaction
Contracts may be made in a variety of ways including:
- By means of the spoken word (for example face-to-face or by telephone)
- Partly orally and partly in writing.
- May be implied from the conduct of the parties.
- By email or by clicking a button on a website.
Our experience shows that many people do not realize that a contract may arise through their email communications.
We have dealt with several cases where email chains have given rise to contracts and the resulting legal obligations that go with contracts. Imagine one of the parties, relying on what the other party have told /said to them, has carried out work. In such a case the party who has carried out the work is entitled to some form of payment based on the principle of “quantum meriut”; that is, they should be made a reasonable payment or the work they have done.
Commercial client’s and sales and marketing teams should take note of the fact that contracts can arise through emails and may commit them when they least expect that.