To understand the provisions of any agreement, it is important to have a grasp of the basic principles of contract law. That is why Anassutzi & Co ltd has developed a training programme specific for business owenrs, financial directors and commercial managers.  

A contract is a legally enforceable agreement giving rise to obligations for the parties to it. The formation of a contract is complete when the basic principles of offer, acceptance, consideration   and intention to create legal relations are satisfied (the four basic elements).

An agreement is formed through offer by one party with acceptance of that offer by another party. This involves a matching of the two communications of offer and acceptance.When a contract is formed through standard terms and conditions of business (sale or purchase) if both parties purport to impose their own standard terms, difficulties arise in determining which terms will prevail.

The approach taken by the courts is that an acceptance which attempts to impose new terms is not an acceptance at all, but is a counter-offer which can be accepted by an unequivocal acceptance by the other party, or by performance. This means in practice that the last set of terms dispatched before acceptance or performance (the last shot fired in the battle of the forms) will prevail. Some contracts may be written, or oral, or partly written and partly oral. For more information and to find out if what you are doing is correct book on our Drafting Commercial Contracts seminar

Other contracts may need to be written or by deed to be legally enforceable. In the past, courts have found that contracts do not always have to be signed. Even though the parties to a contract had not executed the draft agreement that had been drawn up, and they had initially intended that it should not be binding unless and until the agreement was executed, the contract was binding on the parties as, on the evidence, they had been acting in accordance with the contract's terms and they had, on the facts, effectively decided that the agreement did not have to be executed after all.

This decision was overturned on appeal on the construction of the facts.In another case, the Court of Appeal held that a counterparts clause prevented a contract from being formed, even though the parties had performed a substantial part of the contract. However, this decision was overturned in March 2010 by the Supreme Court, which held that although the parties never signed the formal written agreement, that agreement had come into effect notwithstanding that the agreement was expressed to be subject to contract.

The parties had by their conduct waived the subject to contract provision. Lord Clarke commented that "the different decisions in the High Court and Court of Appeal and the arguments in the Supreme Court demonstrate the perils of beginning work without agreeing the precise basis upon which it is to be done. The moral of the story to is to "agree first and to start work later." Businesses may not always find it possible to act on Lord Clarke's advice, but should be aware that by beginning to carry out their side of the contract they may waive the protection offered by a "subject to contract" provision. Better still make sure you have the necessary understanding and grasping of legal contracts by attending our Drafting Commercial Contracts seminar at a great price.