In order to understand the basic concepts of English contract law it is worth being aware that many of the principles were developed in the eighteenth and nineteenth centuries under the doctrine of ‘Freedom of Contract’. This means that parties to a contract can enter into whatever terms they want, without any interference, influence or input from the courts or the government, with the exception of illegality, fraud or other legal wrong. The terms that are agreed within a contract may sometimes appear to be more in favour of what party over the other however, as the parties are free to enter into whatever terms they want this will still result in a legally binding contract once agreed and signed. Therefore, after entering into a contract it is no argument or defence to claim the terms are ‘unfair’ as under the doctrine of freedom of contract, there is no requirement for the terms to be so. The lesson here is to be fully aware of the terms of your contract and your contractual obligations before signing the contract, which will actually mean reading it, including the small print!
Although standard forms of contract are used extensively in the UK construction industry, they are not always as easy as you would think to get agreed and signed. A number of years ago I was involved in large new build housing development where I was acting as Employers Agent for a large Housing Association, a Registered Social Landlord (RSL). Before I drafted the JCT Design and Build contracts I asked the RSL whether they had any specific contractual terms which they wanted amending, adding or deleting from the contract. About a week later, I received a document in the post from them which had obviously been prepared by their solicitors which gave almost a clause by clause narrative of amendments that they required. As I started making the amendments I started to wonder why they had bothered with the use of a standard form of contract as the amount of changes they required was so comprehensive. I persevered with the changes and then eventually sent the contracts and documentation to the Contractor for signature, at which point the fun really started! I can only imagine what the Contractor thought when they noticed all of the amendments and all I can tell you is that they were not impressed. As the Contractor objected to some of the amendments and wanted other terms re-worded and others removed, the contract negotiations became very protracted, in fact after a number of meetings and endless emails and telephone conversations, both parties signed the contracts, however this took over two months to achieve from when I first drafted the initial contracts.
Whatever the nature of a contractual relationship, be it a multi-million pound new build housing development as described above or even something much simpler, it is worth understanding the fundamental ingredients that are required to form a legally binding contract, which I will discuss in next week’s article.
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