In English law, most contracts do not need to be in writing to be valid. However, not every conversation leads to a contract… so how do the courts draw the line?
Tell-tale signs
After a telephone call between two businesses, one claimed £1m in fees from the other for services allegedly rendered at their request. The court said that there was no intention to create a contract in this phone call because:
- the call was brief and the fee was large – it was unlikely the companies would not have agreed to record the terms in writing
- it was normal practice to use a written contract
- the fee was larger than normal – and unusual features would normally be recorded in a contract
- there were no emails between the companies about a concluded contract (instead emails referred to a proposal)
- the internal telephone note did not refer to an agreed contract
- the contract had no purpose as the supplier was already involved
- the supplier did not provide the alleged services
- the supplier did not invoice the alleged fee.
Contract formation
The court said the phone call was not an offer. A follow-up email might have been an offer, but it was not accepted by reply or any conduct of the alleged client.
The court also decided that there was no mutual intention that the phone call would result in either an obligation to provide any services or a liability to pay a fee.
The bare minimum for a contract are: a clear offer, unequivocally accepted, involving consideration, backed by intention and creating certain terms.
What should you do?
Agree, record, sign and only then start work!
Moorgate Capital Corporate Finance Ltd v Sun European Partners LLP [2020] EWHC 593
