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Are Unsigned Contracts Enforceable? It All Depends on Parties’ Intentions

Are contracts that have not been properly executed by signatures from all parties still enforceable? As a High Court ruling showed, the issue usually depends on whether there is a mutual intention to create legal relations.

A developer had engaged a contractor to design and build a retirement community. A contract in standard form was negotiated at some length and a price of £18 million was agreed. Cost overruns were encountered, however, and, following completion, the contractor sought up to £33 million from the developer.

Although the contractor had signed the contract, the developer never did. The contractor therefore argued that no binding contract had come into existence and that it was thus entitled to be paid not by reference to the contract, but to a fair valuation of the work it had actually performed.

Following a preliminary hearing, however, the Court found that the contract remained binding despite the absence of the developer’s signature. The contractor’s plea that the parties only intended to be bound once the contract was signed by both sides was rejected.

All essential matters had been agreed before the contractor’s signature was appended and there had been a clear intention to create legal relations. It was the contractor who had insisted that a formal contract be in place and, in performing the works to completion, it had exhibited a belief that that was the case.

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