New Cases on Forming a Contract

welcome to this data webinar on new cases on forming a contract. I hope you're watching it as a drafting non contentious practitioners and also is a litigator because it's relevant to both types of practitioners. This'd because we had a meteoric rise of these cases in the last few years. So what are we covering? Letters of intent. Emma News 80 piece. Whatever you like to call them on letters, Heads of terms, authority to proceed. Basically documents which can kick off a contract and then become the contract. We're going to look it contract by conduct on the question of subject to contract. We're going to think about forming a simple contract, which is not indeed. And it would be contract if you will. We're going to look at settlement agreements. If you're watching me from the litigation perspective, that is a really key issue, as those can often go wrong. What happens is the settlement agreement itself becomes cases. We're going to think about capacity and authority on those issues on information began to look it signing up to a deed, executing indeed and finally, any signatures update. If we don't want that in 30 minutes, we'll be doing pretty well, thanks. So let's start with letters of intent. My favorite. When it's tell of our letter of intent, State doesn't really. It's not a 10 about a big upon. It doesn't really have a specific legal meeting. It means different things to different people. After think. Elective intent is where purchases doesn't have time to do the contract and so wants the supplier to start. Andi wants to give them some comfort in a piece of paper, which is, well, we will pay you on, will pay you this much, so get on and do it on. There will be a contract in due course, so the request that the contractor carries out certain works. Andi provides a little bit of comfort in relation to payment, but it means different things to different people. My top tip when I'm dealing with organizations, contracting professionals is to try and work behind the contract, not in front of it. The case that is the most one of the worst decisions ready from Spring court in English contract your history is the Miller case, the yogurt case. That's because it is the best case we have on laying the groundwork for conduct or performance based contracts. And, as you can see from the part of the ratio that that the perils of beginning to work without agreeing the precise basis, the moral of the story is too agree First, I wouldn't start later, but it's easy to say that. But how many of us are running after the business to catch up with their operational practices? I have a little knack now, which is when people come in and say, We need a contract and we need it quickly. But what I like to do is to make sure that I always ask, Have you already begun? Because that that would help me understand that I'm not just drafting from scratch. I'm negotiating with perspective that there already is a contract in place. So one of the issues about Mrs Intent, which sounds sort of suitably Willie, is Is it a contract or not? Is it binding or not? And for a letter of intent to binding, you pretty well have to spell that out. Or so we always thought it should record in agreement so that the parties have already agreed on that way becomes a binding contract if that's what you want, Andi, it provides for some consideration. And it's playing from reading the document that the parties intended to enter into that contract. I've got added there the term binding, non binding, and you'll notice that some of the popular president say that that is because binding nonbinding is a way of clearly flagging up what you anticipate from that clause. For example, a confidentiality or Lauren jurisdiction clause may wish to be binding, or you may decide that way. We hope that we will reach agreement on the project. We endeavour when we use our good faith to enter into negotiations is clearly not binding. So instead of hoping that the words convey the meaning, just put a bracket binding close bracket or non binding. And the reason that I have suggested that is because confusion can rein on this because what we mean by something that's not binding in the next slide contains some of the cases where the courses that wanted what would you know? We are more off. What do you mean? I started the Blackpool airport case because it's the case on best in Nevins, which boosted the meaning of best endeavours to a ridiculous extent so that, unfortunately, the ever had to keep itself open for Jet to to land in the middle of the night for the cheap seats, even though it didn't have the money to do that. And so it was sacrificing it's own interest. It was working against itself on the back of the best endeavours obligation, which, you know is quite know what we thought. It waas equally if you have an agreement to agree. That's traditionally not finding, however, in the nervous case, which isn't one of the recent cases on letters of intent and a bowl of Arab International bank, whether there's a binding contract and if so, on what terms depends upon what we've agreed? Well, if it was so simple, judge, it depends not upon the subjective state of mind, but upon consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations. And, um, it had agreed upon the terms which they regarded as essential because what the court regards as essential is really just the price. So you're in a danger zone working against a letter of intent. Memorandum of understand what you call it, where the prices being agreed. No price, no contract, quantum merit, but no contract, but equally price were already taking the steps towards a contract. So you know it is confusing. In the nervous case, it was a letter of intent in relation to a bank loan against an aircraft agreement leasing facility. Well, they haven't performed that no money changed hands, but they were still bound perform it because although it had got nonbinding clauses, the operation of the jurisdiction close at the end of the letter intent converted everything into a binding agreement. And this is one of Leggett's last refuge of the desperate to rely upon otherwise nebulous provisions he was able to imply into the endeavors good faith negotiation type of clauses, some sort of metric, which converted them into a single binding document. So it is. It is tricky. You do need toe hold that document back. I think it's easier to imply a contract than toe hold one back now to avoid the confusion. Um, you might I want to think about badging binding, non binding. So what happens if this letter intention of subsequent failure to agree the a k. This case is the problem that it's better to reach a full agreement than to delay and failed to reach any detailed agreement. Tool This is the problem is that the letter of intent without a full agreement meant that there wasn't necessarily any contract on so the essential terms I haven't been agreed and in particularly in particular that the way in which they dealt with liability. So you're in this kind of hinterland of not one thing or the other, so we can find examples of cases where there was an agreement that is almost cases where there wasn't. It's difficult to predict. So there are three types of contracts. I know you know this. We're talking about written contracts, but the intersection between verbal and the conduct or the implied contract often give you a powerful cocktail. Well, it was a bit written on. It was a bit conduct. It was a bit an email, and then we talked about and then we did, and actually what you have information analysis is a hybrid between all of them, and I would say that when when people are pleading a contract to cast your net a bit wider, and not just to look at the documents, but to look wider of the way the parties have bean working together and interacting. Get some memorandum of understanding. So letters of intent, binding or non binding Hello, use a slightly different really, because they're supposed to be top level, high level documents commercially useful but not sufficiently nitty gritty to be a legally binding document. Or so we thought on. There are some popular precedents from a years. This was a popular president, which went to the Court of Appeal because it did have the classic formulation toe hold the contract back, subject to contract on the words draft. So one party was clearly under the impression that it wasn't yet within this contract. Unfortunately, the other party who were the licensee of the source ones they were going to sell on the television another outlets had actively represented itself is a licensee was very pleased to be a licensee of the master chefs. Those buns provided imagery for the programme to be aired and had detailed in a memo that Mannatech had to pay ribeye in accordance with the deep. The deal memo and unfortunately or fortunately, depending which side you're on court said. Well, actually, what you've done there is mawr than merely preparatory. You've gone on to telephone calls. You, you've had you've been treated as if you were a licensing. In those circumstances, the conduct gets document over the line. Andi, if you have performed to more than a 1,000,000 proprietary extent, you're bound. That's a full document if you like. Well, there's no difference. Is there between a formal on an informal contract? I hear a lot. There isn't. So this contracts by conduct point is certainly a concerning issue. Wittle once begun, keep going. What happened in Whittle was that they had an MOU and a letter of intent just one stage. But they kept going. They kept their heads down and they just kept going. Is the service provider and then it's up doing quite well out of that, really. Not because they had a contract the stages 2345 but because they had a quantum Eric claim. So they did what they were supposed to do, and they did a bit more so they got what it was supposed to get under contract all on. Then the rest of it came to an unjust enrichment route. Another way of achieving pretty much your price. As I say, it's the officious bystander test. It's not what you think. And I think it's what somebody looking at the whole performance would imagine. Js is there because it's a good example off a single case. Bucking the trend, it had to go to the lawyers. I mean, they had firm handshakes and Js They said, Well, we don't we don't we don't greet. Agreed with you say all great Well, you know, from what you've just been saying, Helen, then they made a condom? No, because we have to send it to the lawyers. It's not great on the court said, Well, you know, you gotta send it to the lawyers. It's not yet that. Okay, so what we're going to look at now is getting into a simple contract. So let's come out of the mire of contracts by conduct and think about signing up a proper document. Um, there are a few things to think about here. Firstly, if it's a simple contract, not indeed, never need a witness. Actually, I think it's confusing Taber witness on the block because is it indeed you know, so simple. Contract never needs a witness. It all it needs to be is signed by an authorised person on that could be anybody provided they have the authority. Will the delegate power to do that? I will come to authority in a moment. They don't actually need to be signed because it's a simple contract. You could take a box. You could make terms available upon request. All the transformers has worried us where it's said here, terms available upon request is all of it to casual. Do something reasonable to bring the terms into the attention of the other side. You could have standard terms and conditions. Don't forget Battle of Forms The last shot Still Good law dating from the seventies, revised by the Court of Appeal in 2009 and technology. But if you are going to be the last shot, be the last shop you know that's an operation this year, isn't it? Really, And I love frame agreements with the precedence to the top, and then people can call up for using purchase order or work package agreement under the frame So when it comes to incorporating, forming a simple contract picks a strategy that style that structure that works for you be realistic about it. One universal theme throughout this is that an unsigned contract can be very dangerous. On unsigned contract is evidence that the contract is not binding, although if they performed against an unsigned contract, we're back to the last section they forget with these signatures on, we're going to look at an update on this later on. But at this stage with a simple contract, an electronic signature is in writing. And I say that because the word in writing appears often when you draft. So the cases of Golden Ocean on the Quango case are examples of emails where the email is sufficient. So even though they haven't signed the document or even attached the document there said in an email, Are we going to be good to go? Are we ready? We're ready. And in that situation, they e mails together, made up the chain of negotiation and were sufficient for signature. So if you put your name on an email and you indicate that you take responsibility for its comment, then it's a binding contract now in Gold Notion. That was the case, even though it was his nickname at the bottom, off the email on, even though it was a guarantee, which requires a signature under the old 16 77 Stuckey to fraud. How much more when the male bring in a contract? A simple contract where it's not a guarantee I want to just It refers to some settlement agreements because I sometimes think that when we litigate Andi, it's a different way of working to working under a non contentious environment. Sometimes the pressure off being ready to get court or after a long mediation means that the agreement context is difficult. Settlement agreements in litigation terms are contracts. They still obey the same rules of formation. We have an awful lot of good law from this little scene of context. The problem is that without prejudice is being used. That's great. That's doing a good job. But the problem is that without prejudice is not Samos subject to contract? Who doesn't have the same operation of holding the document back? That subject to contract would now subject to contract in Mueller, which was the yoga case where they performed against the draft. Waas effectively null and void because once you start performing, it's no longer subject to contract. However, don't not put it in its doing a certain job in the case of Bieber and Teasers, where a settlement agreement was arranged and agreed. And then they said, Oh, well, actually, we haven't yet finished it. Could we have some clothes? Is there something that you have finished? It's a great stuff. What's cooking? So that sense, the court said. There's no two stage process. Even though you're litigating, you don't stop that train and then negotiate. If you make an agreement, you make an agreement. It's a one stage process. Offer acceptance, so you have to create the right conditions to negotiate. You do that using subject to contract, subject to final execution by my plant, subject to court approval, subject to a condition precedent. And generally that's useful because subject to contract can be meaningless If you have performance, that's much more of a risk with relational contracts, not so much for settlement agreements. The other problem there is that Barnes and Noble is, um, is a case where they talked about it in terms of it being an informal agreement. And as I've said course, there's no difference. An informal formal it's still a contract, so subject of formal agreement is definitely not going to keep that from being effective or operational because it's meaningless. Subject to contract might have worked. Finally, in new brain Sun Microsystems There they sent an email saying, This office gonna be open till 40 clock today where opponent will disappear High octane litigation this on the other side right back and said agreed on so effectively the courts as well. The fact that you needed Tomlin order or Cause order doesn't already stop it from having Bean reached. In other words, is the agreement behind me or in front of me? The fact that you put it in NATO writing and in a full court continues doesn't stop there already being an agreement. Common mistake, litigators. When is the point of agreement? Is it in front of you or is it behind you? So we were talking about contracts underhand, simple agreements. I just need to tell you about Section 43 of the Companies Act, which refers to the authority point anybody consign, provide a vehicle that authority on also, to mention limited liability partnerships go through the regulations, obey the same principle. So the execution block there signed for and on behalf. For now, the reason I put up for it on behalf is to bring us to the point of capacity. In what capacity are you contracting? Is it you or your company? You or your partnership? You all the unincorporated organization, The fair test case in the hammock case are examples off the presumption on the Presumptions, not what you think. The presumption is that it is you individually, unless you pull it out. Another way to buy Sign something. It's May. If I some sign something for and on behalf off. It's the individual. It's the body upon the design, acting for that I am an agent from a member. Awful unauthorized signature to on that test is placing the presumption with the individual, not with the entity. So those blocks need to say very clearly, which capacity, individually or on behalf. On a good example off that is where you have directors acting on behalf of companies. Now, when we have directors acting on behalf cos we also have the issue of a sensible authority on the case of what Food Association Football Club is a good example off the principal off actual authority, Ostensible authority Day factor with or the various routes here to achieving of the authority principle on it again refers to section 44 of the Companies Act. Now. Section 43 is a simple contract, but Section 44 actually does more. It's a section we use for deeds, but when you use it with simple contracts and you're the right person under that act, the authority is presumed so. The football club and transferred a player out of season or at a time out of window because they used a good signature I two directors or a director, plus the witness or a director, plus a secretary or a seal, then under Section 44 5 even though nobody's actually agreed to it. The fact that they've gone through the paraphernalia off achieving the Section 44 compliance meant they were bound. It's a presumption. So stick like glue to Section 44 even though it's not. Indeed, it's not because you need the extra signature formalities of a deed is because you want the presumption even if the board don't agree, even if the person didn't have authority even is that capacity was in doubt. If you have obeyed Section 44 on the rules of Signature of Companies LLP's other types of organizations, then do you have that presumption? Now? There are a number of cases on a sensible authority, and we've looked at the nervous case. Remember that was the aircraft lease with a letter of intent which leg it transformed into a binding agreement. They did try and hold the whole thing back because the Mr Abdullah, they said, didn't have a thought. Who is he? They said, You just have authority on its one of many cases where the doctrine of ostensible authority is now pretty enormous on the course, that little academic, really, he looks quite sensible. What have you got to be? No tohave extensible authority? Well, maybe the cleaning lady or the T personal the receptionist really great at their jobs, But there are enough visual cues to say you don't look like the person who would have authority, and unless it's clearly visually and no brainer, then you will have authority said it is a huge principal now, and so most of the cases on a sensible authority allow the principle to bind the company. That's not quite seems delegated authority. The Ramsey and Low case is a good example of Gordon delegating authority to his father in law, Michael Hutchinson, finding out to his peril that got him entangled into a guarantee which he would rather not have been entangled in. But he had delegated that authority. So, having looked at authority, we're not gonna take a closer look at Section 44 off the Companies Act 2006 on. There it is. It sets out the methods that give us up presumed authority. So you really do need to make sure that you're either two or thrice symmetries. So that would be directors. Or come sex a director, but not a camp sec in the presence of a signature, or the seal on the seal should ideally be witnessed. Let's turn now to contracts under deed. If you're using, indeed, than the execution block is pretty important. First of all, it's got to be in writing a simple contract. You could have a verbal, simple contract or contract by conduct, but the deed has to be in writing. You get extra time for limitation. Add a course you don't need to have consideration, but it must be clear on the face of it that it's indeed on. It must be validly executed. That's the Law of property Miscellaneous Provisions Act, which helps us to understand execution. One of the things that could be quite concerning is that if you mis executed deed, then what is the status of the document? Now, if it's a property transaction, you're going to have something equitable. There. Aren't you bringing it into the domain of purely commercial contracts? You may find that the thing is void from the beginning. That was a result in the case of breaks and bleeds, where, because they have not properly witnessed the deed it WAAS avoid from the beginning caused all sorts of problems so very much a case of making sure that you're going to use. Indeed, you stick like glue to Section 44 Section one of the Lord Property Miscellaneous Provisions Act, which just says make sure there's a witness. If you're an individual, all if you're 1/3 sector charity unincorporated association, you go back to constitutional documents on, make sure that it's good. One of the other trip hazards in execution is the rule in pickets case. Now, this is a really old case. We're looking at recent cases, so we're gonna come forward 400 years and just remind ourselves that the ruling pickets cases it using. Indeed, and the whole thing isn't complete that it's not correctly executed. It's only for deeds to the mercury rule. Just took that on demand. Confirmed it in a more modern context where Crease signed execution pages were added later to a full document. So when the person signed them, the document wasn't complete, so it was a void. Leica Shine in Case is a case of the least without a plan, and they put the plan on later. It's void and unenforceable. I find that in litigation, people are very well aware of that room. I had a lovely case where she left the rest of the deal in the car, is pouring with rain, just took back page to the front door to knock the door to get it executed, and she was ever so honest in her evidence it was pouring with rain. I left the rest of the D didn't think our I just took the back way. It was literally two meters people to meetings, but fatal. The document must be complete at the point of signature. We don't need that for simple. We do need that for deeds. One of the things that has often been said is that if you have a deep, you can't use any of these digital electronic signatures that we were looking at previously with simple contracts when you could, you may little tick a box that's no longer strictly true. And if you haven't seen it, that I commend to your attention the law Society Practice Note. 2016 on execution of a document using an electronic signature. Well, it's not news for simple contracts, but it is useless demons you can now sign by ticking a box by digital signature by advanced signature. By using the doc you sign type of electronic platform. How is that? It still needs to obey the lower for Miss Layla's probably propped him. Miscellaneous Provisions Act Section 44 of the Companies Act or on your own internal constitutional documents. That's because, although you can use it electronically on click click, they're still needs to be on appropriate witness. You'd have to be pretty quick, because if you don't notice observant Lee, you might miss the click Click, but you still need toe witness contemporaneously the click click. Here come the blocks their deeds for individuals with the witness. This one is the common seal Noticed that the seals should also be witnessed here to his two, and they have to be in the same place. Andi have to be sorry. They don't have to be in the same place. I beg your pardon that can be in different places, but they're coming in with sufficient individual authority not to avoid that that one doesn't need witnessing the next one is other than by common. Seal is a director, plus a witnesses. They do need to be in the same place, so those who could be contrasted in that way there's a limited liability partnership with two members. Andi. There is another one for a limited liability partnership, which is a signature of a member, plus a witness. It follows the Companies Act. This is an authorised person under section 44 to so they are coming in and it could be. For example, a power of attorney is being used in this one. On there is a corporate attorney. Um, a lot, Um, as you can see in the block, it's been allowed to show this P away there. So that's just consider now are key points on recent cases. Firstly, contract my conduct. Huge risk work behind the contract. The mou yellow I may be binding, subject to contract condition. Preston must be clear. Must not be overridden by performance. Settlement agreements require both without prejudice on subject to contract on a good deal announced to make sure that you haven't already agreed something check capacity on the heart fall because it will go to the individual first on the entity Second authority could be de facto actual extensible. You're probably gonna bring in the entity even though the person doesn't have actual authority. Deeds require signature attestation on delivering on. There are formal requirements as well. Make sure the whole deed is signed at the point of execution on new E. Signature rules are coming in for deeds. I hope that's been some help. Thanks for being with me