Two contrasting cases highlight the importance of proceeding with care with a transaction or service before a commercial contract is in place.
1. In G Percy Trentham Ltd v Archital Luxfer, both parties found themselves in a contract before agreeing all of the terms as a transaction had taken place before it was finalised. This situation could result in essential terms being missed off.
2. In British Steel v Cleveland Bridge, despite late and out of sequence delivery, British Steel were not liable to pay for Cleveland’s claims as work had started before a formal written agreement was in place.
If you want to have control over the formation of a contract, take time to agree the terms of the contract in writing before payment or performance. Failure to do this can result in an unattractive contract existing sooner than you had expected or, equally, there being no binding or enforceable agreement. In either case, the uncertainty caused by an oral contract will likely make resolving any dispute arising out of perceived breach or misunderstanding riskier and more expensive.