From what moment is the contract considered concluded in English law?

The moment of emergence of legal rights and obligations can be decisive in relations between partners and clients, etc.

According to Art. 638 of the Civil Code of Ukraine:

the contract is considered concluded if the parties in the proper form have reached agreement on all essential terms of the contract, including those defined by law as essential or necessary for contracts of this type .

However, according to Art. 5 of the Civil Code of Ukraine "On Private International Law" in the relations of the parties with a foreign element, the parties may choose the substantive law of another jurisdiction.

1. In the cases provided for by law, the participants (participant) of legal relations may independently choose the law to be applied to the content of legal relations.

2. The choice of law in accordance with the first part of this article must be clearly expressed or directly follow from the actions of the parties to the transaction, the conditions of the transaction or the circumstances of the case, which are considered in their entirety, unless otherwise provided by law.

3. The choice of law can be made with respect to the transaction as a whole or its separate part.

6. The choice of law is not carried out if there is no foreign element in the legal relationship.

Moreover, a foreign element is considered present even when the participants in the legal relationship are entities registered in Ukraine, but the participant of one of them is a foreign company, a citizen (clause 2. part 1 of article 1).

And the law of England and Wales is often chosen because of its flexibility, reasonableness, adherence to the principle of reasonableness, even if something is not specified in the contract or in the legislation of the direction.
Therefore, people can often exchange messages, sign documents on which it is not considered that this document is a legally binding contract, etc., and this issue is insignificant until one of the parties goes to court.

In contrast to the continental system of law, the general system of law does not have a rigid attachment to the "form" of concluding a contract.

For example,

In Reveille Independent LLC v Anotech International (UK) Ltd(1) the Court of Appeal found that a binding and enforceable contract subsisted between parties to a 'deal memo' on the basis that the parties had, by their conduct, acceded to its terms, even though the memo provided that it would not be binding until signed by both parties and the signature of one of the parties was missing from the memo.

To form a contract, the following four elements are required

1. an offer;
2. acceptance;
3. consideration; and
4. the intention to create a legally binding agreement

Courts will take into account:

1. the information available to both parties when the contract was drawn up

2. if the contract was negotiated or in standard form

3. if the buyer had the bargaining power to negotiate better terms

In a relatively short judgment, the Court of Appeal began by providing a succinct overview of the rules of offer and acceptance which bore on the resolution of the appeal:

• An offer may be accepted by conduct as well as by express assent, but only where that conduct evidences, on an objective analysis, a clear and unequivocal intention to accept the terms of the offer.
• It is possible to accept an offer on terms set out in a draft agreement that is drawn up by the parties, but never actually signed.
• If a party has a right to sign a contract before being bound, it is open to it to waive that requirement and conclude the contract without insisting on signature.
• If a signature is the prescribed mode of acceptance, an offeror will be bound if it waives that requirement and acquiesces in a different mode of acceptance. Where signature as the prescribed mode of acceptance is intended for the benefit of the offeree and the offeree accepts in some other way, that acceptance should be treated as effective, unless it can be shown that the failure to sign has prejudiced the offeror.
• A draft agreement can have contractual force, even where the parties have not complied with a requirement that to be binding it must be signed, if essentially all the terms have been agreed and their subsequent conduct indicates this. However, the court will not reach this conclusion lightly.
• Subsequent conduct of the parties is admissible to prove the existence of a contract and its terms, although not as an aid to its interpretation.

The general rule is that a person is bound by the contents of a contractual document he has signed whether or not he reads or understands it and, even if he does not understand the language in which the contract is expressed (Parker v South Eastern Railway Co, The Luna). 

Signature will usually make it difficult for the signatory to successfully argue that the written terms of the agreement do not represent what they have agreed: see e.g L’Estrange v. Graucob Ltd. (1934).

The High Court held that the parties had ‘signed’ the emails by inserting only their first names at the end of the emails; responding to an email was the equivalent to sending a signed hard copy letter countersigned by the recipient, in circumstances where the second email is sent as a reply and so creates a chain, as opposed to creating a new email; and a chain of emails could constitute a single legal document.

Consideration (the benefit each party to a contract receives)

Currie v Misa (1875), which states that consideration can consist of a right, interest, profit, benefit, detriment or forbearance. There are two types of consideration: executed and executory.

Amount of consideration

Thomas v Thomas (1842) Consideration must be ‘sufficient’ and adequate; however, this does not mean it has to be of market value.

Foster v Driscoll (1929) Consideration in a contract must not be illegal.

Stilk v Myrick (1809) Consideration cannot be a duty which currently exists

Intention

The basic position is that when two people (or companies) come to a commercial arrangement, there is an automatic presumption that they intended to create legal relations. 

To claim otherwise is difficult.

Blue v Ashley [2017] EWHC 1928 - example when parties did not intend to enter the contract

This case concerned an action brought against the well known entrepreneur, Michael Ashley.  Mr Ashley was pursued by a business consultant by the name of Mr Jeffrey Blue.  Mr Blue alleged that he had been employed by Mr Ashley’s company, Sports Direct Group, to provide business consultancy services.

The evidence of Mr Blue was that, at a meeting in a pub with Mr Ashley and three other representatives of Sports Direct, Mr Ashley (after drinking at least 8 pints of beer) had promised to pay a £15 million bonus to Mr Blue if he could ensure that Sports Direct’s share price moved above £8 per share. It was common ground between the parties that the meeting in the pub had been an informal social setting. Mr Blue alleged that Mr Ashley had nonetheless made him an offer, intending to be bound by legal relations and that Mr Blue had accepted that offer.

Subsequently, the share price of Sports Direct did indeed rise above £8 per share.  When Mr Ashley refused to pay Mr Blue the £15 million, Mr Blue issued proceedings in the High Court to recover the sum.

The outcome

Giving judgment in the High Court, Mr Justice Leggatt dismissed Mr Blue’s claim. This was on the grounds that the parties had not intended that Mr Ashley would be legally bound by his rather extravagant promise to Mr Blue.  The Judge made a number of observations; the main being that an evening of drinking in the pub was an unlikely setting for formal contract negotiations.  Further, it was not actually within Mr Blue’s power to achieve the aim of increasing the share price above £8. Finally,  it would have been out of Mr Ashley’s character in any event to make such a promise.

Consequently, the Judge concluded that considering the predominantly social nature of the meeting, when he applied the necessary objective test then the only reasonable conclusion was that Mr Ashley’s statements had amounted to no more than mere “banter”.  As such Mr Blue could not rely upon Mr Ashley’s statements as a binding contract.

Order a contract for my situation

+38 (093) 1776558 Oleksiy

[email protected]