When does an agreement become legally binding?
Discussion
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?
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?
Yes. In a word! 
A contract is binding as soon as there can be demonstrated an offer, consideration and an agreement.
For example, if I were to offer to buy an item for you for a fiver, and you agree, that is as legally binding a contract as anything solicitors can draw up on pages and pages of T&Cs.
The reason why it is often the case that a signed agreement is preferred is that a party can prove that their terms later on and that of course an agreement has taken place.
For example, you could deny that our conversation to buy your item for a fiver ever took place, or you could disagree and thought I said a tenner. If this was in writing, and you signed something - even if it is the back of a fag packet which outlined our agreement, then it is of course very difficult to deny that that agreement has taken place as was written.
What sometimes complicated this is where there are T&Cs provided before an agreement takes place. In this, they may state what and when constitutes a binding agreement and any clauses either party may have to cancel. After seeing these T&Cs if you then proceed and make an agreement it is deemed that you have agreed to them whether you have picked up a pen or not.
It all depends on the specific situation and the specific terms involved.
A contract is binding as soon as there can be demonstrated an offer, consideration and an agreement.
For example, if I were to offer to buy an item for you for a fiver, and you agree, that is as legally binding a contract as anything solicitors can draw up on pages and pages of T&Cs.
The reason why it is often the case that a signed agreement is preferred is that a party can prove that their terms later on and that of course an agreement has taken place.
For example, you could deny that our conversation to buy your item for a fiver ever took place, or you could disagree and thought I said a tenner. If this was in writing, and you signed something - even if it is the back of a fag packet which outlined our agreement, then it is of course very difficult to deny that that agreement has taken place as was written.
What sometimes complicated this is where there are T&Cs provided before an agreement takes place. In this, they may state what and when constitutes a binding agreement and any clauses either party may have to cancel. After seeing these T&Cs if you then proceed and make an agreement it is deemed that you have agreed to them whether you have picked up a pen or not.
It all depends on the specific situation and the specific terms involved.
JonRB said:
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?
You could be.Am I wrong?
An oral contract is every bit as binding as a written one - it's just obviously more difficult to prove since it's generally Party A's word against that of Party B.
The T&Cs will only be incorporated into the contract if they had been provided before the verbal agreement was reached. If they're not produced until later (assuming that the parties haven't dealt with one another beforehand and they were produced on a previous occasions), they don't form part of the contract.
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.
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.
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 said:
JustinP1 said:
A contract is binding as soon as there can be demonstrated an offer, consideration and an agreement.
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?
Their own T&Cs set out when the contract is binding - it does specifically state these situations.
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?
There may still be a binding agreement of some sort, depending on precisely what was said and agreed over the phone, but it certainly won't incorporate the written T&Cs in the agreement that was subsequently faxed over, unless of course you've dealt with him in the past on those T&Cs, as I mentioned above.
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
caro said:
Ah, but given the content of the phone call, was there an intention by both parties to be legally bound before the written agreement was signed and returned?
Thats my reading of it too.- 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.
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.
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.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.
Of course the amicable arrangement is for the provider to hold the first payment on account against future business from the consumer.
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