When does an agreement become legally binding?

[JonRB]

In general terms, if two companies were entering into an agreement for one to provide services to the other (say, advertising) and verbal agreement had been made and payment taken for the first of a number of instalments, and said provider's Terms and Conditions stated that a contract were formed on either a) receipt of first payment, b) email confirmation or c) a signed Agreement, is that legally binding?

And if the consumer (ie. the person buying the services) then cancels further payments a day or so after the agreement has been made, and the Agreement was not signed, then are they liable for the full amount?

I am of the opinion that a legally-binding contract has not been entered into until something has been signed by both parties in writing.

Am I wrong?

[JonRB]

JustinP1 said:

A contract is binding as soon as there can be demonstrated an offer, consideration and an agreement.

Indeed.

JustinP1 said:

JonRB said:

... verbal agreement had been made and payment taken for the first of a number of instalments, and said provider's Terms and Conditions stated that a contract were formed on either a) receipt of first payment..

This is the bit that stuffs you.

As long as they showed you these T&Cs before you made the payment then from the face of what you said there is a contract in place.

Indeed. However, where things become unclear is when you have a situation where the provider says on the phone "ok, we'll send you an agreement, you sign it and fax it back to us, but in the meantime to speed things up let me take a few details including your credit card details".

If they were then to go ahead and take an initial payment in anticipation of the agreement being signed, yet instead of signing it the other party said "actually, I don't want to go ahead" or "I want to cancel" then is a legally-binding contract in place then?

You could argue that initial payment has been taken by the provider before it was authorised by the consumer, since the consumer had not signed the agreement yet.

Edited by JonRB on Thursday 6th March 16:03

[JonRB]

JustinP1 said:

Were the T&Cs sent at the same time as the agreement? And critically, did you get the T&Cs before you gave your card details?

Ah, yet more lack of clarity.

Keeping things hypothetical, if the provider and consumer had an existing relationship, you could argue that the T&C's had been seen by the consumer, despite them in this case being sent by the provider after verbal agreement had been made. Which is what Lurking Lawyer is saying, and is indeed the case in the hypothetical situation I'm talking about.

I think it hinges on whether or not the provider taking the credit card details from the consumer where the consumer honestly believed them to have been given in anticipation of signing the agreement, yet the provider made a charge anyway, whether that constitutes consideration being made or if it constitutes an unauthorised debit.

Things could (hypothetically again) be yet more complicated by WorldPay being involved since it would be difficult to know who would carry any chargeback should that avenue be explored.

Edited by JonRB on Thursday 6th March 16:13

[JonRB]

JustinP1 said:

*However* in this case the advertising company have made clear in their T&Cs that a verbal agreement is not binding until payment has taken place or the agreement signed.

Thus the crux of this would come down to how and why you gave your credit card details. It sounds like it might be for the reason that as soon as you return the agreement the payment can be taken without further contact.

They might argue that they took the payment as it was authorised by you. Thus payment was taken and the contract begun.

The endgame of this is that in court they would have to prove that the contract has been entered into. If it is your claim that you gave your credit card details subject to vetting the agreement when it arrived then this will be difficult.

Yup. That's my reading of it too. And should it come to court then that is what would be pivotal.

Of course the amicable arrangement is for the provider to hold the first payment on account against future business from the consumer.