What Constitutes a Valid Contract?

Contracts play a crucial role in building successful commercial relationships. They establish the terms governing transactions, agreements, and partnerships between businesses. A legally valid contract is a binding agreement recognised and enforceable by law. It formalises the promises made between parties and ensures that obligations are fulfilled as agreed.

At Expert Commercial Law, we have access to a highly experienced panel of commercial contract lawyers who are available to assist you with your case. If you have been left wondering, ‘what constitutes a valid contract?’, then please contact us today.

What constitutes a valid contract?

A valid contract in the UK is a legally binding agreement between two or more parties, enforceable by law. For a contract to be valid, it must meet certain essential requirements: offer and acceptance, consideration, intention to create legal relations, and certainty of terms.

Offer and acceptance: One party must make an offer, and the other must accept the offer. The offer must be clear, and the acceptance must mirror the offer without adding new terms. This forms a clear agreement between the parties to the contract.

Consideration: Consideration refers to something of value exchanged between the parties. Each party must either provide something or promise to refrain from something as a price for the promise received from the other side.

Intention to create legal relations: Both parties must intend for their agreement to be a legally binding contract. This intention is typically assumed in commercial contracts.

Certainty of terms: The contract’s terms must be clear and definite. Vague terms or missing key aspects can render a contract unenforceable due to uncertainty.

Legal capacity: Parties must have the legal capacity to enter a contract, meaning they are of sound mind, at least 18 years old, and not coerced. Additionally, the contract’s purpose must be lawful.

Does a contract have to be written?

Generally, a contract does not have to be in writing to be legally binding. However, a written contract offers a clear, tangible record of the terms agreed upon, ensuring all obligations are explicitly stated. Contracts can be formed in several ways, including:

• In writing (either as a formal document or through correspondence)
• Verbally, through spoken agreement
• Through the actions or conduct of the parties involved

Although most commercial contracts are written to maintain a clear record, this is not a strict requirement. Written contracts don’t always need to be signed, and drafts of formal contracts are typically not binding. Similarly, unwritten contracts do not require any specific formalities.

Types of commercial contracts

There are many types of commercial contracts, each serving different business needs. Depending on a business’s requirements, a contract may follow industry standards or demand bespoke drafting and detailed consideration. Regardless, a commercial contract should always be tailored to the specific circumstances involved. Here are a few common types:

• Non-Disclosure agreements (NDAs): NDAs protect the confidentiality of shared information between the parties intended in the contract.
• Supply of goods and/or services agreements: These are among the most frequently used contracts, defining the terms under which one party supplies goods or services to another. Such agreements can vary widely based on factors like the industry, type and value of goods or services, and the duration of the supply arrangement.
• Agency agreements: In an agency agreement, a ‘principal’ authorises an ‘agent’ to act on their behalf. Different types of agencies exist, such as introduction agencies (where agents introduce customers to the principal for a fee), marketing agencies (promoting the principal’s products or services), and sales agencies (selling on the principal’s behalf).
• Distribution agreements: This contract, made between a supplier and distributor, allows the distributor to resell the supplier’s products. Distributors can be appointed on an exclusive, non-exclusive, or sole basis. Distribution agreements require careful drafting, as they may raise Competition Law issues.
• Franchise agreements: These agreements set the terms under which a franchisor grants a franchisee the right to operate under the franchisor’s brand, following their established business model.

Each contract type plays a vital role in defining clear terms and managing risks in commercial relationships.

How can Expert Commercial Law assist?

Our team take the stress out of finding you a commercial contracts lawyer to assist on your business matter. Our panel of commercially focused solicitors are well versed in contract law.

Our panel of commercial solicitors provide comprehensive advice on all types of commercial contracts and agreements. They can support your business’s day to day operations and provide legal advice before you sign a contract. Our panel has extensive experience across various sectors and regulatory frameworks.

Each commercial contracts lawyer is vetted before being allowed onto our panel. This is to ensure our clients receive the best possible service. We only select the best in the business. All of our solicitor firms are authorised and regulated by the Solicitors Regulation Authority (SRA).

Alongside the contract services our panel of solicitors can offer, they can also help with commercial claims. This includes intellectual property matters, partnership disputes, and restrictive covenants.

Please note we are not a law firm; however, we maintain a panel of trusted and regulated legal experts. If you contact us in relation to a case, we will pass your case on to a panel firm in return for a fee from our panel firms. We will never charge you for passing on your case to a panel firm.