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Reports : Is it worth the paper it's written on?
Generally under Scots law there is no requirement that there must be a signed document before there can be a contractual relationship. It is possible to create a contract by telephone, by email and in rare cases simply by the parties' actions.
The recent Court of Appeal case University of Plymouth v European Language Centre Limited is a useful reminder of the dangers of attempting to conclude a contract by telephone or an exchange of emails.
UoP supplied teaching facilities and accommodation at its campus to ELCL who ran summer holiday language courses. In the past the parties had signed written contracts which detailed the financial and administrative arrangements as well as the facilities, accommodation and meals that were to be provided. On this occasion, however, there had been only an exchange of emails regarding the maximum number of rooms that UoP could provide, as well as numerous telephone conversations between the parties. ELCL argued that the emails and telephone conversations amounted to a binding contract between the parties. However, the Court held that these emails and telephone conversations were merely part of the preliminary negotiations and did not give rise to a binding contract.
The contract is formed when both parties have the intention to be legally bound and are agreed as to the material terms of the arrangement. However, if you are negotiating the terms of a contract verbally, it is always best practice to confirm in writing the agreement that has been reached. Equally, if there is an ongoing email exchange between parties discussing the terms of a proposed contract and you do not want to create a binding contractual relationship, you should make it clear in the body of the email that the parties do not intend to be legally bound at that stage.
Taken from Tods Murray LLP's e-corporate bulletin, 13th November 2009.
If you wish to discuss any commercial contract issues with Tods Murray then please contact Gregor Boyd or Susan McFadyen
Disclaimer
Todds Murray state that the information contained in this e-bulletin is not intended to be exhaustive. It is intended to provide general information only and does not constitute legal or other professional advice. Specific legal advice should be sought in each instance.
© Tods Murray LLP 2009