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Why you don’t need a Written Contract – But it helps if you have one

People sometimes say ‘but I didn’t agree in writing’, as if this gives them a special trump card that allows them to renege on a promise.
When we talk about a contract, a lengthy document of impenetrable small print comes to mind, with any number of signatures and initials all over it.

But contract is just another word for an agreement, and to be frank, the main advantage of writing it down and getting the parties to sign it, is that it makes it a whole lot easier to prove what was agreed and by whom.

Handshake

“lets shake on it…”

A word of warning though. Just because you have an agreement, written down or otherwise, doesn’t mean that you can take legal action against it. Hundreds of years of people trading and doing business has seen some basic rules (and some rather convoluted ones) evolve in the law of contract. To be legally enforceable a contract must involve something of worth exchanged for something else of worth – an agreement to give a gift is not a legally enforceable contract. Something must have been offered by one party and accepted by another, and the parties must have intended that the agreement was to be legally binding.

Where family members and close friends make agreements the Courts will presume that the parties did NOT intend it to be legally enforceable – unless something strongly suggests otherwise. You can see more about these basic elements of contract here: http://briefcaselaw.co.uk/legal-awareness-blog/what-makes-a-contract/

So what do you do if you made an agreement – with a trader for example, but you have no formal record of what was a spoken agreement? Well first you cross your fingers and hope that the other party sticks to the deal. Indeed, if they don’t you would be well advised to use all your skills of diplomacy and charm to get them to deliver, before you start loading threats of litigation into your legal rocket launcher.

But if all else fails, then of course you should consider going legal, if someone has broken a promise. From this point forward, you proceed just as if the whole deal had been written down and signed in blood. First, you (or your lawyers) write to the other side stating clearly what the agreement was. (Don’t be surprised if they do not agree!) Then if necessary, you proceed with litigation, based on what you say the agreement was. Ultimately, if the matter gets to a court trial, both sides will present evidence to the Court and the Judge will make a decision.

Where the agreement was written, there may be plenty of argument about what the writing actually means, or how the law should be applied, but the basic words of the contract probably won’t be in doubt. But in the case of an oral agreement, the evidence is largely the statements that the parties submit to the Court – and you won’t be surprised to know that those statements usually don’t quite match! Each side gets to cross-examine the other on their story – testing their statements and trying to find cracks. The Judge’s job is to decide which party is …mistaken, and give a verdict accordingly.

So ‘I didn’t agree in writing’ doesn’t make for less of an agreement – it just makes it harder to prove what the agreement was. If you are sure of your ground and that the other party is lying – go and tell a Judge. They are pretty used to wheedling out the truth and if you can convince them that you’re right a verbal contract is as good as a written one.

Words: Rupert Lipton

Posted in Uncategorized

What is a “small claim”?

A small claim is a claim that is allocated to the small claims track, a simplified court procedure that is litigant in person friendly. Hearings are informal and the usually strict rules governing the use of evidence do not apply. A good thing too, given the recovery of legal costs in the small claims track is rather limited. It includes, but is not limited to, fixed costs for commencement of the claim, court fees, loss of earnings for the party and his witnesses (capped at £90 per day per person) and expert witness fees (capped at £750 per expert). Since the cost of legal representation cannot be recovered, the small claims track often sees parties going unrepresented. Experts can only be used if allowed by the court – permission must be sought, and will only be granted if necessary.

Claims not exceeding £10,000 will normally be allocated to the small claims track, but the court will have regard to other factors, such as the complexity of the facts, law or evidence. When calculating the value of the claim, the court will disregard, among other things, any amount not in dispute, a claim for interest and legal costs.

There are other conditions. In personal injury claims, the financial value of the claim must not exceed £10,000, where damages relating to the actual injury must not exceed £1,000. For example, £700 for food poisoning and £8000 for damages relating to loss of earning for missing work (total £8,700). For residential housing disrepair claims, the estimated costs of the repair must not exceed £1,000, and the financial value of any other claim for damages cannot exceed £1,000.

Royal_courts_of_justiceNote that a small claim only comes to be during the allocation phase of a claim. The allocation phase occurs fairly late in the litigation process. First the parties will try to resolve the matter at hand without the aid of the court, using correspondence and, if appropriate, mediation. If the dispute is not resolved, one party will file a claim form at court, which begins the litigation process. If the defending party continues to contend the claim and files a defence, the court will serve a notice on each party to complete an allocation questionnaire. The parties stipulate which track they think the claim should proceed, taking into account the factors mentioned above.

Once allocated, the court will fix a date for the hearing and direct the parties to deliver to all parties and the court copies of all documents being relied no later than 14 days before the hearing. Other directions may be given. Even at this stage, the parties are encouraged to settle matters outside of court.

If the claim proceeds to the hearing, it will generally be held in public (but can be held privately if both parties agree). The court may limit cross-examination (questions to the other party) as it sees fit, and the judge himself may lead with questions. The judge will pass judgement, and will provide reasons for his decision, either at the time of judgement or later, orally or in wiring.

Words: Diogo Gouveia

Posted in Legal Awareness Blog

What makes a contract?

Most people have an implicit understanding of contractual relationships – when a binding agreement has been made, when someone doesn’t perform their side of the bargain, what’s a fair deal and what isn’t. Whether you’re an individual or a business, such understanding underpins your daily activities, potentially leading you into litigation with another. As a litigant, to increase your chances of success, you will want to armor yourself with a deeper understanding of contract law.

English law has made explicit contractual elements – if any of these is lacking, there is no legally binding contract! The elements are: contractual intention, agreement and consideration.

Contractual intention is presumed to exist in business agreements, and presumed not to exist is domestic and social agreements. You can challenge these presumptions by showing evidence to the contrary if you want to establish that no contract existed, or that a contract did exist, as the case may be.

Agreement boils down to offer and acceptance. An offer is a definite promise to contract on and be bound to certain terms. Acceptance is unconditional assent to all the terms of the offer. Acceptance cannot be given if the offer has been terminated, either because it was expressly revoked or because it was rejected or if it has lapsed. An offer cannot be revoked after it has been accepted. Lastly, A conditional acceptance – “I accept, but I’ll only pay £100 instead of £150” – should be understood as rejection of the initial offer and as an independent offer in its own right.

4275674005_d4e4c41a2d_zConsideration must typically have economic value, and is either a benefit to the person receiving it, or a detriment to the person giving it. The law also has it that it need not be adequate, but must be sufficient – it need not be of equal value to the offer, only of nominal value. Past consideration – such as a favour done for someone in the past – is not good consideration, unless it was given as a request from the other party and the parties understood that fulfilling the request would be rewarded in someway.

Now that you have established that a contract exists, you must look to its content. Terms in a contract will either be either conditions, warranties or innominate. Conditions are the most important terms of a contract. Remedies for breach of conditions include termination of contract in addition to damages. Breach of warranties – less important terms – do not give rise to the right of termination, only damages, no matter how serious the loss caused. Innominate terms can function as conditions or as warranties, depending on the consequences of their breach – the courts will make the decision.

In addition, terms can be express or implied. Express terms are terms that were agreed between the parties, whilst implied terms, though not agreed between the parties, are included in the contract by virtue of the law (through statute or the courts). Some of the most common terms implied by statute come from the Sales of Goods Act 1979 and the Supply of Goods and Services Act 1982, for example, that goods sold or supplied are of satisfactory quality and fit for purpose.

I hope this introduction proves useful. Look forward to more focused articles on contract in the near future.

Words: Diogo Gouveia

Posted in Legal Awareness Blog

Small Claims Just Got Bigger

The small claims track’s (relatively) simple and informal procedures and its strict limit on the recovery of legal costs encourages litigants to ditch lawyers and take it upon themselves to conduct their own litigation. Until recently, claims were limited to a value of £5,000, but as of 1 April 2013, the small claims track has had its limit increased to £10,000. Whether this is of benefit to litigants in person very much depends on their individual circumstances.

Perhaps the biggest impact will arise from the newfound need to fund litigation for claims ranging between £5,000 to £10,000, since winning litigants will not be able to recover their legal costs from the losing party (with few limited exceptions). To exacerbate matters, such a significant increase in value may bring with it an equal increase in the complexity of the case. There is likely going to be an increase in litigants in person for claims within that range who find themselves unable to put forward their best case without professional legal representation.

Small Claims Frustration

How the litigant in person deals with the situation will depend on their particular circumstances. Individuals may have the toughest time of all. Learning about and running the litigation whilst remaining on top of work and family responsibilities is a task so gigantic that it may discourage some from pursuing their case. If some money is available, there are some enterprises, like Briefcase Law, who provide practical help and assistance with claims, though the individual is still responsible for conducting the litigation himself.

Otherwise, legal contacts may prove the best and only relief. Note that a litigant in person may be assisted at trial by a McKenzie friend (layman or professional, remunerated or not), though such assistance is limited to moral support, help with case papers and quiet advice on conduct.

SMEs are better placed to deal with the changes themselves. As litigation is recurring, we may start seeing, either out of necessity or managerial initiative, employees take it upon themselves to act as litigants, gaining experience and legal proficiency over time. Indeed, SMEs may feel empowered by these changes, able to take action more often without needing to resort to lawyers. Of course, litigation can be an arduous and time consuming process which, taken with the commercial inviability of instructing solicitors, may dissuade businesses from pursuing their claims at all.

It is not just for the litigants themselves to adapt to these changes. The judiciary too will have to take positive steps to ensure that the rise in litigants in person is well met. There will be pressure to simply legal terminology and procedure and to improve reasonable court-side assistance for litigants in person.

With regard to procedure and court assistance, judges may find it beneficial to take on a more active role at trial, something akin to an inquisitorial system. Though a big shift from the traditional adversarial system, it would aid the litigant in person present relevant case details and leave him feeling less alienated and baffled at court conduct. Whether it will happen is a different question.

Words: Diogo Gouveia

Picture: DezCreates (https://secure.flickr.com/photos/botunda/)

Posted in Legal Awareness Blog