General Lack of Formal Requirement

Lecture 2. FORMING THE AGREEMENT

Deeds and other formalities

The formal test of agreement is achieved by the concept of the ‘deed’. This is a formal written document, signed and, traditionally, sealed (though this is no longer a requirement since the Law of Property (Miscellaneous Provisions) Act 1989). The existence of a deed will be regarded as indicating that there is an agreement. There are certain contracts where a deed is required, but the device can be used for any type of contract if the parties so wish. This type of formality should be distinguished from the situations where some special procedure is required in addition to the finding of an agreement. In this situation there may be an agreement, but the courts will not enforce it unless certain formalities have been complied with. Three examples will be mentioned here. First, all contracts involving the sale, or other disposal, of an interest in land must be in writing and signed by the parties. The justification for the stricter rules which apply in relation to this type of contract is that contracts involving land are likely to be both complicated and valuable. Many commercial contracts, however, are also complex and valuable, yet there is no requirement of a written agreement (though in practice there is likely to be one).

A second type of contract where there is a requirement of a certain degree of formality are contracts of hire purchase, and other credit transactions, should be in writing and signed. This is a protective provision, designed to make sure that the individual consumer has written evidence of the agreement, and has the opportunity to see all its terms. A similar protective procedure operates in relation to contracts of employment, though here the requirement is simply that the employee should receive a written statement of terms and conditions within a certain period of starting the job, rather than that the agreement itself should be in writing.

A third situation where formality is required is when an agreement to guarantee the debt of a third party must, in order to be enforceable, be in writing and signed by the guarantor.

In other words: “promise to answer for the debt, default or miscarriages of another” is put in writing.

General Lack of Formal Requirement

In most cases, however, English law imposes no formal requirements and looks simply for an agreement between two parties. In other words, the contract does not have to be put into writing, or signed, nor does any particular form of words have to be used. A purely verbal exchange can result in a binding contract. All that is needed is an agreement. This simple assertion, however, masks a considerable problem in identifying precisely what is meant by an agreement. This may seem easy enough: it is simply a question of identifying a “meeting of the minds” between the parties at a particular point in time. That, however, is easier said than done. By the time two parties to a contract have arrived in court, they are clearly no longer of one mind. They may dispute whether there was ever an agreement between them at all or, while accepting that there was an agreement, they may disagree as to its terms. How are such disputes to be resolved? Clearly, the courts cannot discover as a matter of fact what was actually going on in the minds of the parties at the time of the alleged agreement. Nor are they prepared to rely solely on what the parties now say was in their minds at that time (which would be a “subjective” approach), even if they are very convincing. Instead, the courts adopt what is primarily an “objective” approach to deciding whether there was an agreement and, if so, what its terms were. This means that they look at what was said and done between the parties from the point of view of the “reasonable person” and try to decide what such a person would have thought was going on.

It has been argued by Collins that this approach means that the courts are not actually looking for agreements between the parties but:

whether or not the negotiations and conduct have reached such a point that both parties can reasonably suppose that the other is committed to the contract so that it can be relied upon.

In other words it is behaviour justifying “reasonable reliance” on the other party’s commitment that is what the courts are in fact looking for, rather than “agreement”, whether looked at subjectively or objectively. There is, however, not very much to choose between an approach which uses the language of “objective agreement” and as opposed to that of “reasonable reliance”, and certainly little in the way of practical consequence. The former is what is used here, not least because it ties in more comfortably with the language used by the courts, which tends to focus on the presence or absence of “agreement”. Provided that it is remembered that what is required is objective evidence of such agreement, rather than an actual “meeting of the minds”, then this analysis will work satisfactorily, without giving a misleading picture of what is actually happening.

A further complication with regard to ‘agreement’ arises once parties start to contract over a distance - that is, not face to face. The particular problems relating to contracts made by post or other forms of distance communication are discussed later in this chapter. Suffice it to say here that once this type of contracting is allowed, the idea that at any particular point in time there is a “consensus ad idem”, a “meeting of the minds’, becomes very difficult to sustain. If there is a significant gap in time between an “offer” and its “acceptance”, the likelihood is that in a significant number of cases the parties will not be ad idem at the point when the courts decide that a contract has been formed.

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