Many people believe that written contracts only become effective when signed, but that isn’t the case. Indeed, contracts can be verbal and still be binding. Often it is the behaviour of one party that helps determine whether a contract really existed, and whether it should be enforceable.
A recent Court of Appeal case, involving a cookware company and the producers of a popular television cooking show, underlined the danger of relying upon signatures to ensure a contract is binding.
The cookware company negotiated a deal with the producers so it could exhibit the show’s logo on its wares, which would also be featured and promoted during three televised episodes. Proper written contracts were never drawn up, but the principle features of their agreement appeared in a memo which was signed by the cookware company but not the show’s producers.
When the cookware company tried to renege on the deal, the producers launched court proceedings to enforce what they viewed as a valid contract. The company argued no binding agreement had been reached, using language in the memo referenced earlier, and presumably inserted at the producers’ request, which stated that the producers could not be bound informally, and that any contract would only be enforceable once it was signed by both parties. In the end, though, the producers prevailed before the High Court, which found that a valid contract had been completed and would be enforced.
In dismissing the cookware company’s appeal, the Court found that the producers had, by their conduct in moving forward with the transaction, waived the provision in the memo that there would be no binding contract in the absence of their signatures on the memo. That conduct consisted of the producers having in fact performed their obligations in the manner contemplated by the terms of the agreement reached, and memorialised in that memo.
If nothing else, this case proves how important it is to get your agreements in writing, properly negotiated with the help of lawyers who understand your commercial needs, and can ensure your interests are protected at all times.
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