There are five legal essentials for a contract in English law:
- Offer: a promise to do something
- Acceptance: a nod, handshake, email or other action which accepts that offer; it has to be a ‘yes‘ (or ‘hell, yes‘) rather than a ‘yes, but…‘
- Consideration: price, exchanged services or other value (as little as a used sweet wrapper or peppercorn); swaps and barters are still contracts
- Intention to create a contract: between two companies or businesses this intention is presumed to exist
- Certain terms: A contract needs to be written in such a way that someone, who knows nothing about the negotiations, contract history or any promises made, can immediately and clearly understand everything that both partners have agreed to do.
From this, you should note that most of these are fairly easy to tick off your ‘is it a contract?’ list. Where many home-made contracts (and some very sophisticated contracts like letters of intent) fail to satisfy the legal requirements is in having the right terms to create certainty.
The normal test for determining whether the parties have reached agreement is to ask whether an offer has been made by one party and accepted by the other. Even where an apparent agreement has been reached it may fail to give rise to a binding contract because the agreement is incomplete or insufficiently certain
Certainty means more than just clarity of expression. It requires you to ensure your agreement includes all the key terms which the courts view as essential to the formation of a proper contract: “the terms on which the parties were [of one mind] must not omit any term which, even though the parties did not realise it, was in fact essential to be agreed in order to make the contract commercially.”
This means you need the terms without which the contract cannot be enforced ie terms required for the contract to exist. You also need any terms which the businesses have agreed are essential for a binding contract – so if you insist on a specific paper trail or are buying a bespoke item, it must be written into the contract.
You can have a contract with these bare minimum terms. Even if some important terms are missing, if the court does not consider those terms essential, then you will still have a contract.
For a construction contract the bare minimum terms for certainty are:
- price for the works/services and
- time to provide or complete the works/services.
However, once you have started to provide works/services, the court can even imply a reasonable price and set a reasonable time for those works/services to be completed.
If this is all you need to create a contract, what is stopping you getting it written simply and agreed?
Cases: HHJ Toulmin in Felton Construction Limited v Liverpool City Council  EWHC 3049(TCC), Trollope & Colls Ltd v Atomic Power  1 WLR 333