THE phrase “My word is my bond” can be traced back in English Literature to Shakespeare’s times and is referred to in the Merchant of Venice. The phrase develops and in 1670 it appears in J Ray’s English Proverbs in the form of “An honest man’s word is as good as his bond.”
How then does this phrase apply in the modern business environment of social media, emails and internet shopping? In essence, can a business contract be enforced if it has been agreed verbally between parties or, in some cases, if no agreement exists at all? Very often firms may have been trading quite happily with each other for many years and it is only when a dispute arises that the parties realise there was never a written business agreement.
In terms of a legal perspective, there is certainly no requirement for a business contract to be in writing. A contract could be made verbally by means of spoken word (either face to face) or over the telephone.
In a virtual environment it can be even easier to enter into a contract. A contract could be entered into when clicking a button on a website or engaging in a chat on Facebook or Whats App.
The key elements to a contract
How then do the courts set about deciding if a contract has been formed between two businesses? The first step is to look at the key ingredients in the formation of a contract. There must first of all be an offer from one party to another and that offer must be accepted. There must be consideration for the contract which in plain English means that there must be a price agreed for a transaction.
There must also be an intention of the parties to create legal relations. In a business environment there is an assumption that the parties wish to enter into a contract unless the circumstances preclude this. An example of this would be an advertisement which would not normally be seen as an intention to create legal relations.
Enforcing a Contract
This means it is more likely than not that any event occurred. In percentage terms the probability that the event happened must be (in the court’s view) ?more than 50 per cent.
If you wish to enforce a contract, whatever form it takes, then to enforce it we will need to use the Court System. If you are in England and Wales then this means using the Civil County Courts. The general rule being, if you wish to bring a claim for breach of contract it is up to you as the Claimant to prove your case. This means it is more likely than not that any event occurred. In percentage terms the probability that the event happened must be (in the court’s view) more than 50 per cent. This decision can be based on many factors including witness evidence and consideration of written documents by the court.
There is obviously a risk when relying on witness evidence at court and it can never be certain what a witness will say in open court when being cross examined by a barrister.
In a nutshell, as a lawyer, I would state that before you take any steps into business, either forming a partnership or entering into a new business relationship, it is better to agree the terms in writing and to cover what happens if a dispute arises. However, if you have not done this (and I understand that as humans we like to trust each other at least at the start of a relationship!) then do not despair if a dispute arises. A contract can be formed in many ways and it is always worth seeking legal advice to see if it can be enforced.
If you would like further information then please contact David Farmer at Wilson Browne Solicitors on 01536 410014, by email at or by visiting www.wilsonbrowne.co.uk