In English Law, a Contract does not have to be in writing and/or signed by the parties to be effective and legally enforceable. It is quite possible for a Contract to be inferred by oral words and by conduct if the five tests for an enforceable Contract are satisfied. The five tests for establishing a Contract are as follows:
1. An “Offer” of goods or services (or something else of value) by the Offeror to the Offeree.
2. “Acceptance” of the Offeror’s Offer by the Offeree.
3. “Consideration” (the exchange of something of value) provided by both parties. For example, the Offeror’s Consideration may be goods or services, whereas the Offeree’s Consideration may be the payment of money in exchange for those goods or services.
4. “Intention To Create Legal Relations”: the Courts are generally unwilling to enforce gratuitous promises, such as a party promising a friend to give them a lift by car to a football match and then failing to turn up on derby day.
5. “Certainty of Terms” in the minds of all parties when the Contract was formed.
In most cases, where money has changed hands in exchange for goods and services, there will be a Contract in existence. However, the fifth and final test of Certainty of Terms often causes problems for the claimant, especially where the contract was not in writing. Claimants often attempt to create new terms retrospectively to claw some of their overheads back from the defendant when a dispute arises, which were not certain in the minds of both parties when the contract was formed. Indeed, it is a common sign of an unscrupulous businessperson if they do not use written contracts as they know that if things go wrong, the court will only enforce the “bare minimum” of terms implied by common law and statute. The claimant may not be able to hold the defendant to all their promises if those terms fail the test of Certainty.