What is a contract and what can i do if there is a breach of contract?
Contracts have been a fundamental part of the legal world since at least the Roman period. They are a means by which parties bind each other into a business or consumer relationship. When most people think of a contract, they think of a formal written document, but in truth, a contract does not need to be written.
Contracts are entered into in all sorts of situations. For example, if I were to go and buy a chocolate bar from my local newsagents, I would enter into a contract with the newsagent at the time of purchase.
Despite the importance of contracts in day to day life, many people have little knowledge of how they work or what remedies can be sought if a contract is breached. This article seeks to address some of the basic elements of what a contract is and what you are able to do if you are subject to a breach of contract.
Form of Contracts
There are fundamentally two forms of contracts:
A written contract; and
An oral/verbal contract
A written contract is self-explanatory; it is a contract where the terms are written down. The document is usually signed by all of the parties to the contract. However, contrary to common belief, a contract does not need to be witnessed to be binding. Indeed, if a written instrument is witnessed, it is more likely to take the form of a deed, which is a completely separate form of agreement.
As well as setting out the principal terms of the agreement, a written contract will often set out definitions of words and also ancillary clauses, such as what legal jurisdiction shall apply to the contract and sometimes what remedies the parties may seek if the contract is breached.
Verbal or oral contracts are once again self-explanatory. They are binding agreements that are agreed between parties, but for whatever reason are never recorded in writing. A verbal contract is just as enforceable in English law as a written contract. However, parties seeking to enforce a verbal contract often come across a significant problem when attempting to prove what the terms of the contract actually were. Sometimes there can even be problems proving that the contract existed at all. Therefore, we strongly recommend that parties draw up a written contract in respect of any but the most trivial agreements.
Required Elements of a Contract
A contract in English law is essentially a bargain. Each party to the contract must bring something to it; either through the promise to provide goods, services or some form of payment. Legally, this is known as ‘consideration’ and unless both parties provide some form of consideration towards the contract, a contract will be found to be null and void.
For a contract to be binding, the parties must be able to evidence certainty of intention at the time the contract was agreed. This means that the parties need to show evidence of an intention to enter into legal relations and subject each other to a binding agreement. In the case of a written contract, this is of course easy to prove as both parties would have signed the document. In the case of a verbal contract, however, this can be much harder to prove, particularly if one side to the contract later tries to disavow it.
If you are subject to a breach of contract, what form of remedy can you seek?
Written contracts can sometimes contain guaranteed forms of redress that are included in one of the ancillary clauses. If the contract does not contain a guaranteed remedy (they only tend to do so in the case of high value commercial contracts), then the party seeking to enforce the contract must fall back upon the common law remedies. Principally, this would be to pursue a civil claim for breach of contract. In such a claim, the innocent party will usually apply for one of two remedies:
Damages to acquire monetary compensation for the breach; or
An order for what is known as ‘specific performance’. This will force the defaulting party to comply with their duties under the contract.
In more extreme circumstances, such as where a fundamental term that goes to the root of the contract has been breached, a party may also be able to ask the Court for a remedy known as ‘repudiation’. This is where the Court brings a contract to an end and returns both parties to the position they were in before the contract.
There is a time limit (limitation period) of six years to bring a claim for breach of contract. This starts to run from the date of the breach.
Do you have a contractual dispute? If so, the experienced Litigation team at Levi Solicitors LLP can assist you.