The most dangerous contract is the one you didn’t realise you made

My previous two Chamber articles focused on contract content — the actual wording used. This time, we shift to the underlying framework of contracts: the structure that decides whether those words even apply. It’s less visible, but critically important. And it’s something businesses get wrong every day.

In an increasingly informal business environment, people rely less on traditional signed contracts. Deals now form earlier and more casually — via email, phone, WhatsApp, or simply when someone starts work. If things later go wrong, the key questions become: Was a contract formed? By whom? On what terms?

How contracts form without anyone noticing

Lawyers often talk about offer, acceptance and intention to create legal relations:

• An offer is a clear set of essential terms someone is willing to agree to.
• Acceptance is the other side agreeing to those terms.
• Intention means the parties meant the exchange as part of a real deal, not a joke or casual chat.

The risk is obvious. With a traditional contract the offer, acceptance and clear intention is neatly wrapped up in a formal contract – and nothing is agreed until the full document is signed — “subject to contract”.

But when business is conducted over long informal email threads, WhatsApp or (partially recorded) phone chats, certainty disappears:

• only some points get agreed
• are ”what if….” musings actual offers?
• when was final agreement reached?

Here’s the catch: English law says that unless the parties have clearly agreed when the contract is formed, it comes into existence once the essential terms are agreed. But:

People rarely agree on what the essential terms are

The essential terms may be agreed early but no one notices as they continue negotiations on other important stuff

Worse still, the law looks at the situation objectively. If someone emails, “Yes, we can live with that price”, a reasonable person might think they intended a binding agreement, even if privately they meant that the price was okay but only if they can agree good terms on X, Y and Z.

Why email chains cause so many problems

Email threads are chaotic. They include incomplete thoughts, changing participants and ambiguous phrases like “sounds good”. These feel harmless at the time but, read later, may appear to be acceptance.

A single line buried halfway down a thread can become the unrecognised moment the contract was formed.

Some businesses try adding “subject to contract”, which helps — but only if used consistently and not contradicted by later behaviour.

When actions create contracts

Another issue is acceptance by conduct — agreeing through actions rather than words. Starting work, accepting delivery, paying an invoice or giving instructions can all indicate acceptance. Very common where there are deadlines and so movement needed.

Some less scrupulous businesses exploit this by starting work early to lock the other party in.

Verbal agreements count too

Verbal agreements are usually legally binding. The real challenge is proving what was said. In my experience, even honest people misremember events in ways favourable to themselves — it’s human nature.

So don’t rely on goodwill or memory. After a call, send a brief email summarising your understanding. Like insurance, It feels unnecessary - until you need it.

The battle of the forms

A very common problem is the “battle of the forms”, where both sides try to impose their standard terms:

• Supplier sends terms with a quote
• Customer accepts the quote with their terms
• Supplier delivers goods with another version

Each assumes their terms prevail.

The law usually settles this with the “last shot” rule: the terms sent last before the contract is accepted (often by conduct) usually apply. This can lead to harsh outcomes, with businesses unexpectedly bound by the other side’s terms simply because they didn’t object quickly enough.

Who can bind the business?

Even if terms are clear, you must consider who had the authority to agree them. If someone appears authorised to negotiate, a reasonable outsider may assume they can bind the business — even if internally they cannot. Staff must therefore avoid language implying certainty or agreement unless instructed.

Conclusion

The good news is that clarity goes a long way. Tell the other party when you are still negotiating. Use “subject to contract” if you don’t want anything binding yet. Follow up calls in writing. And make sure everyone involved knows when they can — and cannot — commit the business. These small habits can prevent a great many expensive arguments.

James O'Connell is a partner at Mayo Wynne Baxter. Find out more on their website here.

This is part of a new series we’re running with Chamber members, picking out different experts working in the areas of business you most frequently ask us for advice or expertise on. Keep your eyes peeled for more installments on finance, marketing, sales, productivity and more.

If you want to contribute to the Chamber blog, contact us on hannah@brightonchamber.co.uk