why do you need a written contract?
Having a well drafted written, signed contract in place, could mean the difference, between you enforcing your legal remedies in terms of the contract in the future and possibly losing your claim, or worse, being held liable for a claim and damages.
In order to understand why you need a written contract, we need to cover the following questions:
- What is a contract?
- What are the different types of contracts?
- What are the requirements for a valid contract?
- When does a binding contract come into existence?
- If I only have a verbal contract, how will I prove my legal rights / remedies in the case of a dispute?
(1) WHAT IS A CONTRACT?
In the broadest definition, a contract is an agreement two or more parties enter into with the serious intention of creating legal rights and obligations.
(2) WHAT TYPES OF CONTRACTS DO YOU GET?
A contract does not need to be signed or in writing to come into effect. A contract can be:
- A VERBAL CONTRACT – Which could be during a telephone conversation or a face to face meeting;
- A TACIT CONTRACT – By your conduct. This could be by living in a property and paying an amount towards living at the property every month. This could show a lease agreement;
- A WRITTEN CONTRACT – By signing a written contract or an invoice; and
- PARTLY VERBAL / PARTLY TACIT / PARTLY WRITTEN – This would be the case where there are invoices, as well as meetings and the conduct of the parties.
(3) WHEN DOES A CONTRACT COME INTO EFFECT?
A contract comes into existence at the time of consensus (of the material terms), being:
- At the time a genuine offer is made by a party, with the intention to contract and create a legal obligation; and
- The other party accepts the offer, being conscious of that fact.
(4) WHAT ARE THE REQUIREMENTS FOR A VALID CONTRACT?
The following 7 requirements are required for a valid contract, namely:
- There must be consent (a meeting of the minds –consensus ad idem) between the contracting parties;
- The parties must have seriously intended the agreement to result in terms which can be enforced;
- The parties must have the capacity to contract;
- The agreement must have certain and definite terms;
- The necessary formalities must be observed;
- The agreement must be lawful;
- The contractual obligations must be possible of performance; and
- The content of the agreement must be certain.
(5) HOW DO YOU ENFORCE YOUR LEGAL RIGHTS IN TERMS OF A CONTRACT?
In order to enforce your legal remedies in terms of your contract, you will have to prove the terms agreed.
- If you have a written agreement, you will use the written agreement to prove the terms (other evidence, such as emails or invoices may also be used.
- If you only have a verbal or tacit agreement, you will have to prove the terms by using evidence, such as witnesses, emails, invoices and other records.
Proving a verbal or tacit contract can therefore be difficult, with the effect that you might not be able to enforce your legal remedies.
In conclusion, it is imperative that you have your written contracts in place. Know the terms of your contracts and obtain legal advice when signing a contract.
A properly drafted contract may mean the difference between you being able to enforce your legal rights in the future and losing your claim, or worse, being liable for a claim and damages.
Written By Cherine Hoffman, LLB (Cum Laude), LLM (Tax), Post-Graduate Certificate in Mining
Director at CH Legal Consulting. Website: www.chlegalconsulting.com