Like most commercial lawyers, I frequently remind my clients that they should never sign any documentation unless they fully understand and agree with the content – and preferably have had the benefit of good documentation legal advice upon it!
It is however important to remember that there are many occasions when we find ourselves having entered into legally binding agreements without signing anything at all- but simply by taking some action and receiving a benefit. An everyday example of this is the purchase of a train or car parking ticket. There are, however, other potentially more financially serious examples of the ‘unintended’ contract.
Recently I was finalising the documentation for the acquisition of the shareholding in a company on behalf of one of my clients. As is usual in the circumstances, I had asked for detailed information concerning the company’s liabilities and had particularly asked if the company was committed to any ongoing consultancy agreements. Surprisingly, given what I already knew about the company, the answer was an unequivocal ‘NO’. It was only when I drew the vendor’s solicitor’s attention to the fact that regular monthly payments were being made to two individuals acting in a consultancy capacity that the directors were forced to think again.
There had been no intention to deceive – quite simply the vendor company’s board of directors had misunderstood the nature of, or the way in which, a legally binding agreement can be created.
It is because negotiations or discussions between two parties can so easily lead to an unintentional contract being concluded, that the use by lawyers and others of the words ‘Subject to Contract’ appear so frequently on correspondence or draft documents. There are also occasions when it is not possible to conclude an agreement without intending to – most notably perhaps, those contracts concerning the sale or purchase of a house where the law provides specific protection.
For further advice and documentation legal advice speak to solicitor John Kennar, Head of the Commercial Department at Rawlins Davy PLC on 01202 558844 or e mail him at john.kennar@www.rawlinsdavy.com
