When is a contract a contract

[Audicab]

Hi all, hopefully somebody can help me out and apologies for the long post.

We provide lead generation services for clients and charge a set amount each month, we invoice at the start of the month with 30 day payment terms.

We signed up a new client in August 2016 at a fixed rate of £2k per month for a 6 month contract. We got this as a signed contract. All was going well and I had discussions with their Sales Director about extending it for another 6 months - until July 17. Unfortunately this was done over the phone and the only email I have is as below;


From: Client
Sent: Thursday,February 02,2017 2:25 PM
To: Me
Subject: Re: Jan Invoice

Thanks - was there a report for Jan? I don't think we've seen one yet.

On 2 February 2017 at 13:41,I wrote:
Hi Paul, sorry just back in the office. Jan was the last month of the previous 6-month campaign that we did. The next one runs from Feb to July.



They have continued to pay invoices including the one that was due last Wednesday and everything has carried on as normal.

I received an email saying they are stopping all work with immediate effect and wont be paying any more invoices. To me there are still 2 months left of the contract.

Our client is saying that as we didn't get anything signed or in writing there is no contract so they can stop immediately with no liability to pay for the service going forward.

My questions are;
Legally can they do this
Do we have to continue to provide the service for us to take them to court, if it comes to that.

Thanks, any help would be appreciated.

[Eric Mc]

Conditions for a contract to exist -

Offer
Acceptance
Performance (or part performance)
Consideration (payment or reward)

The contract does not have to be written. It can be verbal. It can even be implied with no formal agreement of any sort. Examination of the circumstances surrounding the behavior of the parties involved can also decide whether a contract exists or has existed

Edited by Eric Mc on Friday 2nd June 08:44

[otherman]

You dont seem clear when the contract was agreed. Was august included, or was it signed in august and started in september?

[Audicab]

otherman said:

You dont seem clear when the contract was agreed. Was august included, or was it signed in august and started in september?

The contract ran Aug 16 - Jan 17 inclusive, the new contract was verbally agreed in Jan 17 to run Feb 17 - July 17 inclusive.

[Eric Mc]

The comment that" there is nothing in writing so there is no contract" is not correct. Contracts, as mentioned above, do not need to be in writing. The only reason why a written and signed contract is desirable is because it usually offers clear and concise evidence that a contract exists.

A verbal only contract is harder to prove - but not impossible.

As I also mentioned, if both parties acted on the terms that had been verbally agreed , then that is evidence that they had agreed to those verbal terms and therefore the verbal contract exists. Whether both parties had acted in accordance to those terms should be obvious by their behaviour. So, if they suddenly stop carrying out their part of the contract, a claim can be made that they have breached those terms.

[Audicab]

Thanks Eric, that's very helpful.

[JulianPH]

As has been said you do have a contract, but your problem is going to be in enforcing it. Small claims court is probably your best route. Even when you get judgement though, you still need to enforce this if they don't pay up.

It can be a lot of hassle and take up a lot of your time (not to mention the costs involved) so weigh this up before commencing this.

Another route is to get your solicitor to send a letter. Whilst this technically carries no more weight than you sending one yourself it is surprising how effective this can be. Something along the lines of;


We are writing regarding your contractual obligations to our client to inform you that you are now in breach of this contract.

We understand that you have indicated to our client that you consider that as the renewal of the original six month contract was not in writing that there is no contact in case. This is not correct and a very simply point at law that your own legal representative will confirm to you immediately.

You renewed the original six month contract and for the last four months both parties have acted under these terms. This can be easily demonstrated. Both parties are therefore bound by the original terms of the written contract.

Unless you take immediate action to remedy your breach of this contract we will pursue this matter in the court with a further claim for legal costs.


You can reword this to send it yourself before engaging a solicitor if you prefer to keep costs down.

[DSLiverpool]

I'd be more concerned in why the emergency stop rather than trying to wring another £4K out of a possibly unhappy client.
The reasons may help you extend other clients in future or worst case stop you from losing them.
Maybe once you know you can come to an agreement over the last few months - if possible always cease business amicably as it has the potential to return.

[JulianPH]

DSLiverpool said:

I'd be more concerned in why the emergency stop rather than trying to wring another £4K out of a possibly unhappy client.
The reasons may help you extend other clients in future or worst case stop you from losing them.
Maybe once you know you can come to an agreement over the last few months - if possible always cease business amicably as it has the potential to return.

This is actually a very good point, providing that the loss of £4k over the next two months doesn't threaten your business.

If you can get by without it it might be better to highlight that the are contractually obliged (as above) but suggest a remedy whereby you will defer these two months for a year and review again them in order to support their business.

If they are having cash flow problems and this helps them they will be very grateful of your understanding and if the worse happens and they go under you still have a claim against the administrators.