What is a binding contract agreement?

By 3. May 2016Articles, News
What is a binding contract agreement

In an ideal world, contracts would be unnecessary. Your client would tell you what work needed to be done, and once it was complete they’d pay you in full.

Contracts exist because, of course, we don’t live in an ideal world. Clients can decide halfway through a project that their priorities have changed, or occasionally might dispute the quality of your work. Perhaps they pay you late, or only for part of the work.

For contractors, the binding contract agreement is the basis of your whole relationship with your client and a correctly-drawn contract will save you and your clients a great many headaches. So what are the fundamentals of contracts for contractors? Here are some pointers:

What constitutes legally binding contract?

A contract is an agreement between two or more parties for a consideration i.e. both parties must offer something of value, such as a contractor’s labour and the client’s money. It’s important that the parties intend to create some sort of legal relationship through the contract.

Contracts become legally binding when the offer has been accepted, although if the acceptance is conditional then the contract only starts when the condition is met. Negotiations that take place ‘subject to contract’ are not binding as there is no intention to form a contract at that point.

Is a contract binding without a signature?

A contract does not need a signature to be accepted – acceptance can happen in lots of different ways, so an oral contract is just as valid as one that it written. In fact, some contracts can be formed and entered into without anyone saying or writing anything. So long as there is an agreement, consideration and legal intention, the contract will be binding.

There are some exceptions – land deals and credit agreements must be in writing – but an employment contract can be entered into orally.

Of course there is an obvious problem with an oral contract – it can be hard to enforce if there is no evidence that it exists, or if the parties dispute the nature of the agreement. Witnesses, notes taken at the time and anything else in writing will add weight, particularly if a judge is asked to make a ruling.

Legally binding contract terms for contractors

For a contractor, it’s important to consider your contracts carefully because they are the basis for your work. If you agree to a badly-written contract, you may be signing up to do more than you had bargained for.

Don’t think that if you haven’t signed a contract that it means you won’t be bound by it. If you are sent a contract and start work on it, that is likely to be considered to be acceptance.

The best practice for any contractor is to have a contract that is specific to you and your services and one which is drafted by a contract lawyer. Using an off-the-peg contract may include terms that don’t apply to you, and also miss out important things that do.

If you’re starting out as a contractor, check out the ContractingWise guide to contract opportunities. And for a free consultation, call our team on 0203 642 8679.

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