Can unsigned contracts be enforceable? It depends on the parties’ intentions
Parties to a proposed contract need to be aware that the contract can still be enforceable, even if it has not been signed by all of them, provided it can be shown that there was a mutual intention that it should be.
A developer took on a contractor to design and build a retirement community. A contract in standard form was negotiated (at some length) and a price was agreed. It was a big job, so the payments due to the contractor were in the millions. Despite that, there were problems and the contractor felt it should be paid more than the figures in the contract.
It turned out that, although the contractor had signed the contract, the developer never had. The contractor argued that this meant there was no binding contract between them, and it was therefore entitled to be paid a sum representing a fair value for the work it had actually done, rather than the price stated in the contract. After the job had finished the contractor therefore claimed (very significant) further sums from the developer.
The court rejected the contractor’s argument. At a preliminary hearing, it ruled that there was a binding, enforceable contract despite the absence of the developer’s signature, because there had been a mutual intention on the part of both parties that they should be bound by the contract, even though the developer had not signed it.
It said that all essential matters had been agreed before the contractor had signed the contract and there had been what lawyers call a ‘clear intention to create legal relations’.
The decision makes it clear that, if one of the parties negotiating a proposed contract wants the contract to be formally set out in a written document, and be signed, before it comes into force, then they should expressly say so during negotiations, or risk the courts saying there was a contract anyway.
*In contentious business, a solicitor may not calculate fees or other charges as a percentage or proportion of any award or settlement.*