An unsigned contract can be enforced. A party can accept the terms of a contract by its conduct. There are grey areas. We advise on those aspects.
In this case, we:
Our client, a plastic container manufacturer, brought a claim against a new distributor for breach of contract. The parties initially agreed a distribution contract. Our client signed the contract, and sent it to the distributor to sign.
The distributor amended the contract by extending the payment terms. The distributor sent our client a signed, albeit amended contract. Our client did not accept the revised terms and did not sign the amended contract.
The distributor failed to sell the containers, and stopped placing orders with our client. The distributor claimed no binding contract existed between the parties. Our client brought a claim for breach of contract.
The contract was for the supply of plastic containers for use in the food industry. It contained the following provisions:
The provision stated that our client would supply the first month’s delivery on extended payment terms. This allowed the distributor time to establish its business and improve its cash flow. The distributor amended this to three months.
The distributor would order a fixed minimum quantity of stock, every month for three years.
This amount would be set on each anniversary of the contract. It was a royalty payment for use of our client’s trade marks.
The court considered whether our client had:
The judge considered what our client had done in reliance of the contract. We confirmed our client had:
In response to our client’s actions, the distributor had:
We successfully argued that our client had accepted the modified contract. Acceptance was effectively communicated to the distributor as evidenced by its actions.
The judge found that notwithstanding the requirement for both signatures, our client had accepted the terms of the modified contract through its conduct. The other party had acknowledged this and received the benefits of our client’s performance.
The only uncertainty arising from the absence of both signatures was the precise date on which the contract was made.
If both parties don’t sign a contract, then it is possible to show both parties accept the contract by their conduct. Note that in this case it required Court action, which is expensive.
John Deane is a partner in the commercial team. John advises corporate clients on a number of business contracts, from franchising agreements to supply of goods and services agreements. Do get in touch with John if he can assist.