This article is especially for those who tend to negotiate their fees via e-mail exchange, which, as we know, is a usual practice these days. Solicitors do it as well, just as many of our clients do in their business practices. We often enter into agreements online with good usage of electronic signatures, to save time on formalities and move to performance.
In a rapidly changing business environment, we want to deliver goods or services immediately and keep the customers happy. To enable this, some may be tempted to take a shortcut, and start working for the client even though not all the terms and conditions are ascertained and approved by both parties.
In the recent case of Fenchurch Advisory Partners LLP v AA Limited [2023] EWHC 108 (Comm), the High Court decided that there was no binding contract between the parties, where the parties failed to agree all the terms of engagement presented to them.
The agreement as to the fees, even though reached by e-mail, was not sufficient in the circumstances to create a binding contract, since the parties lacked the contractual intention at that stage. Further, it was envisaged that they will sign the agreement upon the negotiations, which eventually never happened.
The conclusion is that the party who commences the work (here, Fenchurch Advisory Partners LLP) poses itself at risk of not being paid if the contract is yet to be entered into, and the negotiations eventually collapse. In the case in question, however, the party who benefited from the work (namely, AA Limited), was decided unjustly enriched, and hence Fenchurch Advisory Partners LLP managed to secure payment for the work it had undertaken. This, however, will not apply in all cases.
The offer and acceptance (thus, agreement), consideration, likewise, contractual intention to create legal relations are required for a valid contract, and the lack of any of these essential elements may cause unnecessary stress, difficulties, and expenses that could be avoided, for those who wish to enforce its terms.
It may be, therefore, worth considering an interim contract if work needs to be performed whilst negotiations as to the main contract are still in place. If you have any questions or need any further assistance, please contact one of the lawyers in our business team on 0330 107 0107 or e-mail business@imd.co.uk.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
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