Does my contract need to be in writing?

For contractors, it’s an age-old question: does my contract need to be in writing? But the key word here, as the italics hopefully tell you, is ‘need.’

Indeed, necessity and wisdom are two different things.

The legal position is that for an agreement to amount in law to a contract, it doesn’t generally have to be in writing, writes Roger Sinclair, legal consultant at Egos Legal Limited.

What's in a contract?

Rather, there simply needs to be:

a) clear agreement as to all the essential terms.

‘Law school 101’ teaches that this is generally analysed into ‘offer, acceptance, and communication of acceptance,’ although sometimes that analysis can seem a little artificial.

b) consideration.

This can generally be thought of as ‘for a contract to be enforceable, each party must bring something to the table.’ And thirdly, finally;

c) a mutual intent to be legally bound to the agreement.

Once you have all three present at the same time, unless it is one of the more unusual types of contract that must be in writing (such as a contract for sale of land, or a guarantee), it will follow that, hey presto, you have a contract – and a contract which will generally be legally enforceable.

Implied terms

Contractors, keep in mind it’s true that one can -- in limited circumstances -- expect that one or more additional terms will be implied into a contract. 

A term might be implied into a contract under the obviousness (also known as the ‘officious bystander’) principle.

This is where the term to be implied is so obvious that the courts will accept that it would ‘be so obvious that it goes without saying’ that the additional term would apply.

Or it might be implied under the necessity principle (‘business efficacy’) – if the contract simply won’t work unless the term is implied.

A term won’t however be implied under these principles if the implied term would contradict an express term; or if it might seem reasonable (even though not strictly necessary) to imply it.

The basic terms implied into a contract for services

The Supply of Goods and Services Act 1982 will also imply some basic terms into B2B contracts, e.g. into a contract for services, including

• that the supplier will carry out the services with reasonable care and skill.
• that (if no time is specified for performance), the services will be provided within a reasonable time (N.B. what is ‘reasonable’ here will be a question of fact).
• that, if no price (or basis for determining the price) is specified, the customer will pay a reasonable price (N.B. what is ‘reasonable’ here will be a question of fact).

Buying a bag of potatoes?

Further consider that if the contract is for something simple, of low value, and the circumstances are such that no one is going to get seriously hurt if something goes wrong (like, say, a contract to buy a bag of potatoes), then the fact that the contract is not in writing may be fine.

But, when one steps away from the simplest of scenarios – like potato bag buying, then at every turn, wisdom seems to require that the contract be in writing, for one or more of a range of reasons.

Why your contract should be in writing: the three Cs

In no particular order, the reasons to have your contract in writing are:

• Complexity

Where the key terms are more than just the weight and price of a bag of potatoes, and the timing of delivery, then that quickly becomes more than can easily be covered orally, and of which both parties will have equally clear and accurate recollections.
 

• Certainty

Both parties will want certainty, both as to what they are getting, and as to what they are giving; the first step towards achieving that certainty is putting all of the terms of the agreement in writing.
 

• Coverage

Covering the less obvious areas, perhaps peripheral to the core substance of the contract, but which may still have major importance – provisions such as limitation of liability.

Finally, where does 'subject to contract' come into play?

Given that most types of contracts can be formed orally, and without any real degree of formality, it’s wise to keep oneself alive to the potential dangers of it being claimed that the circumstances suggest one has entered an oral contract, without intending to do so. Therefore, in the course of pre-contract discussions, many will use the expression “subject to contract” to help make clear that they are still at a negotiating stage, and that there is no intent to be legally bound, until everything is both agreed, and enters the pinnacle of the contracts world -- writing.