Contracting under English law - the key principles

To operate a business in the UK, there are a raft of English law commercial contracts required. In this note, we summarise the key principles applicable to English law commercial contracts

26 June 2019
Close up of a pen over a contract to be signed.

Form of contract under English law

It is advisable to have a written contract to ensure clarity, however there is no legal requirement for a commercial contract to be in writing – it is still enforceable if it isn’t written down, although of course much harder to evidence what has been agreed and there is a greater chance that terms you do not want will be implied into the contract. A contract is only properly formed when there is an offer, acceptance of that offer, intention to create legal relations and consideration between the parties.

General requirements for English law contracts

In most contracts, parties are free to contract on the terms that they agree. It is always advisable to have a clear operative part to your contract, setting out clear performance and payment obligations, limitations and exclusions, detailing how risk is apportioned between the parties and the limits of liability of one party to another party as well as termination rights. Certain “boilerplate” clauses are important (e.g. non-assignment of rights and which law and jurisdiction the agreement will be subject to) so these clauses should not be ignored.

Key provisions required for certain English law contracts

There are some important exceptions to the rights of parties to freely choose the content and form of their contracts. These include, but are not limited to:

Contracts with certain agents:

The Commercial Agents (Council Directive) Regulations 1993 impose specific requirements on certain types of agency contracts which include the requirement to have certain specific topics covered in your contract.

Contracts with consumers:

There is a raft of rules governing dealings with consumers. These include the Consumer Rights Act 2015 (CRA) and the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. Both acts prescribe certain specific provisions that cannot be derogated from in your contracts with consumers as well as listing specific and general practices that are prohibited.

Implied terms in contracts:

The UK courts can imply certain terms into contracts, certain types of contracts have terms implied into them (e.g. sale of goods contracts and agency contracts) as a matter of law and certain types of relationship (e.g. lawyer and client) create specific implied obligations.

Provisions applicable to all contracts:

General rules under the Contracts (Rights of Third Parties) Act 1999, the Late Payments of Commercial Debts (Interest) Act 1998, Unfair Contract Terms Act 1977 (UCTA), and General Data Protection Regulations will prescribe certain specific or general requirements and/or prohibitions into all contracts.

Other:

Certain specific specialist areas in regulated sectors (e.g. chemicals or construction) will have specific requirements and should be checked by relevant specialist advisers.

Changing or ending English law contracts

A contract can be varied, amended or updated, if both parties recognise the need for this. Often a variation clause in the contract is used stating that the contract can be amended if both parties agree to it in writing.

Commercial contracts should be drafted with express clauses relating to termination.

If you are considering terminating an English law contract, it’s important to check the whole contract to understand the correct termination procedure and requirements for successfully giving notice (and having that termination notice accepted by the other party). If the terminating party fails to give valid notice, then it’s possible that the party who wanted to terminate could continue to be contractually bound and that party may have committed a ‘repudiatory breach’ of the contract.

Time periods for English law contracts

A commercial contract can be expressed to be for a fixed term (with automatic termination at the end of this period), an initial fixed term (requiring notice of termination at some point after expiry of that term), on subscription (a fixed period which automatically renews for consecutive fixed periods unless terminated) or of no fixed term (which can be terminated at any time by giving notice).

A ‘cooling off period’ (a time during which a person can withdraw from a binding contract without any serious penalties) does not apply automatically in business-to-business commercial contracts. As a result, any rights to cancel or return goods should be clearly set out in the contract. In certain types of business-to-consumer contracts, however, a “cooling off period” is required, allowing the consumer the right to return goods and/or cancel contracts.

For more information about how Burges Salmon can help, please contact Helen Scott-Lawler.

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Helen Scott-Lawler

Helen Scott-Lawler Partner

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