The Risks of Contracting Without a Written Contract in Place

Not all contractors start work with a signed contract in place. Here we consider the risks this may involve, and why a contract doesn't necessarily have to be in writing for it to be legally binding.Starting work without a signed contract means that your position isn't clear, or even worse -it's weak. It provides a solid and concise foundation that will help you navigate the law and make sure that you are on the right side of it. Along with aiding to minimize disputes and resolve any problems that may arise; a contract will communicate to a client, not only the amount that they are required to pay, but also invoice and payment dates. It also means that the contract is legally enforceable and will be able to support you if you decide to take legal action.

A contract doesn't have to be written to be legally binding, although you may have trouble getting these enforced as there is nothing tangible to state what the terms and conditions of the contract were. Email conversations can work as courts would look into the correspondence between parties, if the performance of parties supports it, for example, there are certain consumer contracts that are legally required to be in a written format; these include contracts for regulated consumer credit agreements (loans and credit cards), guarantor agreements and mortgages. If an email is clear in stating the offer for entering into a deal with clear terms and conditions and the other party responds with an acceptance, there is a strong chance that this would be considered a valid contract; however, we would urge all businesses to use formal written documents that protect themselves and their assets within a contract. There are many advances in technology that allow a contract to be signed electronically and be returned in a matter of minutes (although there are certain contracts that cannot be signed this way - wills, evictions and divorces to name a few), cloud computing has also made it virtually impossible to lose or damage these documents. Irrespective of whether you had a written or verbal agreement, in some circumstances, there are legal rights that apply. If the dispute is over goods that have been supplied, a buyer may be protected by consumer law, and with regards to a service, our consumer law gives us certain rights. A verbal agreement becomes binding when the agreements reach 'completeness'; this means that all the T&C's have been met and agreed - if there are still terms to be agreed then the agreement is considered to be incomplete. A verbal agreement that is considered to have been broken can be taken to court; the unhappy party is advised to apply pressure by form of a letter, email and phone calls. Poorly drafted contracts are often no clearer than verbal ones and can present just as many difficulties when it comes to ambiguity. Before any work or exchange is carried out, the contract should be signed by both parties; starting work without a signed contract poses risks. Some businesses are now demanding partial payment prior to services or goods being delivered to eliminate circumstances where there was never any intention of a customer or client paying in the first place.

1. Many businesses and self-employed persons work without contracts and seem to do fine. Do you feel always have a contract in place if you provide professional services to a client? There are times that even with contracts, there exist loopholes and ways customers and businesses "get away with things" and don't respect contracts. Discuss these arguments? Support your views with reasons or examples.

2. Does the contract have to be a formal written document, or can an email conversation suffice? Why? Discuss an example you have experienced or witnessed that supports your reason.

3. What happens if an agreement has been made verbally, and a disagreement over terms occurs further down the line?

4. What best practice contractual advice would you give to a consultant, dealing directly with a new client?

5. Many people that work for themselves as "self-contractors" and do normally conduct business using contracts. Have you conducted business or worked for a business where there were no contracts used? What type of business was conducted and how were the agreements conducted?