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Formal requirements were a feature of English contract law until 2nd half of 20th C. This statute gradually fell into disregard as it came to be used by people who wished to get out of their agreements on the “technical” ground that the agreement didn’t comply with the agreed formalities, so was not enforceable.
- This retraction is consistent with the modern trend which, with the notable exception of a deed, is to place less emphasis on formal requirements in the law of contract.
- “A contract need not be concluded or evidenced in writing nor is it subject to any other requirement as to form[ality]. He contract may be proved by any means, including witnesses” – Article 2.101 of Principles of European Contract Law. This shows declining significance of formal requirements.
- However, this consensus is largely confined to commercial contracts. In consumer contracts a very different picture emerges.
- A number of examples of formal requirements imposed in the name of consumer protection can be found in English law.
The Reason for Formal Requirements
Why do legal systems impose formal requirements upon contracting parties?
Criticisms of formal requirements:
- Time consuming, weighty & awkward, and bureaucratic.
- Not easy to decide out of the many millions of contracts which should be subject to formal requirements.
- Does the contract have to be made in writing or is it sufficient for it just to be evidenced in writing.
- Difficulties arise where parties do not comply with formal requirements, esp. where parties were unaware of the need for formality.
Though these criticisms are powerful, not conclusive. With criticisms in mind, the law imposes such requirements only if good reason for doing so. There does remain a place for requirements of form in modern law:
Reasons in favour for continuing with formalities:
- Parties who involve in purely oral agreements can find themselves in disagreement over what was agreed and when – if all agreements are put into writing these disputes are less likely.
- To make a person who is about to undertake an important agreement go through formality allows one last chance to reflect upon what he is doing. This is important esp. when contract is one-sided (party giving something for nothing may need to e protected from impulsive generosity). This is why donative promises and guarantees are always subjected to formal requirements. Also, people feel from having a pen in their hand that they are entering a sphere of obligation which helps to concentrate the mind on whether they are sure about engaging in a legally enforceable transaction.
- Sometimes formalities needed to mark the transition from negotiation to official and conclusive contract – so they know they should not rely on what the other party has said until it is put into writing.
- Modern legislation requires that a contract be put into writing when one of the parties may need special protection – to ensure that the party needing protection (e.g. loan contracts, residential leases) is provided with all relevant information at the time the contract is concluded.
Formal requirements in English Contract Law
When considering the role of formal requirements in English Contract Law it is important to distinguish two different types of case.
The 1st consists of the case where the formal requirement is both necessary and sufficient to render the promise binding. This is the case of a promise made in a deed.
The 2nd is the case where the formal requirement is necessary but not sufficient to render a promise binding – the formal requirement is an additional hurdle to the usual requirements of a binding contract.
a) Formal requirements which are sufficient to render the promise binding.
The only example in English Contract law of a formal requirement which is sufficient in itself to render a promise binding is a promise that is made in a deed.
Rules applicable to deeds (as found in section 1 of the Law of Property (Miscellaneous Provisions) Act 1989) and their execution:
2) a & b: An agreement shall not be a deed unless it makes it clear on its surface that it is intended to be a deed by the person making. Or it is validly executed as a deed by that person.
3) The agreement is validly executed as a deed by an individual if:
a) i & ii: It is signed by him in the presence of a witness who confirms the signature or signed at his direction (e.g. signed by his solicitor), in his presence and in the presence of 2 witnesses who confirm the signature
4) “Sign” can include making one’s mark on the agreement and the word “signature” is to be understood accordingly.
Deeds have an important part to play in legal practice. They provide a relatively simple means by which a independent promise can be rendered binding. Deeds are made when the parties involved wants to ensure the agreements will be a matter of certain legal obligation and a binding promise. The other circumstance where deeds play an important role is where there is doubt about whether or not importance and weight has been provided for a particular promise. Therefore the parties may choose to eliminate the doubt by including the promise in a deed.
Formal Requirements which are necessary in order to render a contract binding
The 2nd group of cases differs from the first in that the formal requirement does not suffice to render the promise binding – the formal requirement is a additional, necessary prerequisite.
Te parties must show that there has been: an offer, acceptance, consideration and intention to create legal relations in the usual way AND in addition, must show that the formal requirement has been satisfied. This formal requirement may take dif. Forms, contract must either be:
- Made in writing
- Evidenced in writing
- Made by deed.
