SCENARIOTRAINING CONTRACT LAW
REUTERS
SCENARIO Alpha Ltd has a contract to supply support services to Green Plc. The contract is for 4 years because Green Plc wanted the security of a continuing commitment. Alpha Ltd recently started offering hospitality services and entered into negotiations with Green Plc to also contract for these services. Alpha’s standard contract for hospitality services includes the right for either party to terminate the contract with 3 months notice. Negotiations took place, Green Plc reaffirmed their desire for the security of a 4 year deal and draft contracts (including the standard notice clause) were exchanged. An agreement was reached but no contract was ever signed. Six months into the contract to supply hospitality services, Alpha Ltd terminated that contract without notice. Alpha Ltd say that because no contract was ever signed, they did not need to provide any notice to terminate. Green Plc says that it should be implied the contract was for 4 years with no notice clause. They also claim that at the very least they are owed payment in lieu of 3 months notice
WORKING THROUGH USING WESTLAW UK What is the principle in this case? Is there a legally binding contract if no document was ever signed? If there is a contract, how should the notice term be determined? We need to find out if there are any cases where a ‘contract’ has been terminated even if no document was ever signed. The best place to start on Westlaw UK is a Natural Language search. From the Westlaw UK home screen, click the Natural Language search and then enter: contract terminated without notice where no contract signed You should retrieve 100 results most relevant to the query you typed in.
Just from looking at the Subject Areas and Keywords, you can see that there are a number of documents about Agency and Landlord & Tenant law. Use the subject and keywords assigned to each case to determine relevance. You can see that one of the first cases which appear, BVM Management Ltd v Roger Yeomans contains the keywords Oral Contracts and Termination which seem to be right on point so let’s look at that case. Click in to the Case Analysis for that case. As you read through the Analysis document you can see that it is entirely relevant.
We should also click into the Full Text Transcript of the Case to make sure we have the detail of
the decision.
The most important parts within the Transcript are the Arguments of the Parties and the Conclusions.
The judge decided that:
• • • •
There is no dispute that the parties concluded an oral agreement. There is no dispute that, apart from the termination on notice provision, all the other terms of the draft agreement before the parties at that meeting were incorporated into the oral agreement. The only term in dispute is the three month termination provision. When the terms of a contract have to be ascertained from oral exchanges and conduct, that is a question of fact In the case of a contract which is entirely oral or partly oral, evidence of things said and done after the contract was concluded are admissible to help decide what the parties had actually agreed
From this case we can conclude that it is possible to have a legally binding ‘oral’ contract. We can also conclude that it is possible to have an implied notice clause and this can be implied by the draft contracts which were exchanged, oral evidence and the conduct of the parties.
Let’s go back to the Analysis document and have a look through the Cases Cited by the BVM case to see if we can find any other relevant case law. It is always checking through any cited and citing materials to find additional documents to support your arguments.
Now we have the main principles of the law around Oral Contracts, we can do some wider reading around this area of law using Practitioner Texts and Secondary sources.
Go to the Books section of Westlaw UK and browse into Chitty on Contracts.
We could browse through the book, but because we now know that the correct term is “oral contract”, we can search for that within the Book. We’ll put speech marks around our terms so that Westlaw UK looks for those two words as a single phrase. You should get 14 results from Chitty. Let’s click into the first result.
You can use the search term arrows at the top of the screen to jump straight to where your terms appear in the text. Click the right arrow. Change to:
Chitty gives you the background and more detail around the legal effect of oral contracts. This section includes the following useful points:
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The binding force of an oral contract is not affected or altered if after the conclusion, one party sends to the other a document containing terms significantly different from those which had been orally agreed. • An offer may be accepted by conduct but there is no acceptance where the offeree's conduct clearly indicates an intention to reject the offer. • Where an offer, acceptance or both are alleged to have been made by conduct, the terms of the agreement are obviously more difficult to ascertain but sometimes the court can resolve the uncertainty by applying the standard of reasonableness or by reference to another contract (whether between the same parties or between one of them and a third party), or even to a draft agreement between them which had never matured into a contract. When using Chitty, it is useful to note that the footnotes often contain links to related cases on that point of law so can be very effective in
pinpointing authoritative case law for specific principles. This could also have been a starting point for your research rather than the Natural Language search.
When viewing Books, the
icon indicates you are looking at text updated by a Supplement.
Before you finish, it is worth just running a quick search in Current Awareness for “oral contract� to check that nothing related to your area of law has happened in the last few days. You could also set up an alert so that if anything does happen, you will immediately be notified.
PRINCIPLE OF LAW Even if no contract is signed, an Oral Contract can still have binding effect. In the case of a contract which is entirely oral or partly oral, evidence of things said and done after the contract was concluded are admissible to help decide what the parties had actually agreed. The Court should apply the standard of reasonableness or make reference to another contract (whether between the same parties or between one of them and a third party), or even to a draft agreement between them which had never matured into a contract. Following process and the principle laid down in the BVM case, it would be reasonable to imply that the agreement included the three month notice clause.
REMEMBER Use the status icons, terms in context and the case digests to quickly scan materials to see if they are relevant or not. Read the cited/citing material – you may find cases which are even more pertinent to your facts. Check the most current material (Current Awareness) as something may have happened today or yesterday which could affect your case. Once you have found relevant materials you intend to use, set up alerts to ensure that if anything does happen, you’ll get emailed straight away. Look to read around the subject using Practitioner Texts or Journals to make sure you fully understand the principles. These can also point you in the direction of other relevant Cases.