In all transactions there is a stage before lawyers. In my last job, the MD would agree some of our biggest contracts over a glass of whisky and cigar in the early hours of the morning after industry dinners. On one memorable occasion the details of the deal were passed to me on a beer mat. It always helps if a client can come to me and give me as much information as possible about the contract they want putting together which I can then use as a starting point. In most situations those early stage documents will trigger lots of questions, some of which won’t have been considered by my client and the other party to the contract.
Recently however an early stage document has ended up before the courts. Rather than negotiating a contract, two parties were trying to settle a dispute which had arisen between them. One party set out its proposed solution in writing and sent it off for consideration to the other party. The other party accepted the proposal set out in the letter and the court decided that, in the absence of evidence to the contrary, the parties had intended to create legal relations and, it was too late to incorporate any further terms into the agreement.
If you’re trying to work out the commercial background to a transaction, be it a business purchase or sale, contract or dispute settlement and you’ve been asked to put down a proposal in writing please ensure that the document is marked ‘Subject to contract’. Using these three small words will not be foolproof but will go some of the way to persuade a court that the document does not set out the whole story and will leave me with room to negotiate on your behalf.
Of course, it would be even better if you asked me to review the document before sending it off. If you are negotiating a contract or settlement with another party then please give me a call and I’ll do my best to ensure you are protected. Cathy Cook, Head of Company and Commercial – 01924 387110