Does my contract need to be in writing, and signed? – Legal Desk, October 2021
By Dan Leduc
“Every case turns on its facts and an analysis of the parties’ intentions”
By Dan Leduc
October 22, 2021 – The pandemic has accelerated our move to a fully electronic commercial system, which raises the question: Do I need a signed, hard copy contract to have a contract?
While the typically legal response would be “It depends”, we have some guidance from a recent Ontario Superior Court of Justice decision in the case of Ruparell v. J.H. Cochrane Investments Inc. et al.
In this case, the court had to determine whether a non-binding Letter of Intent and ongoing discussions—including text messages—would result in an enforceable agreement for the sale of a Volkswagen dealership to the plaintiff, Ruparell.
The parties exchanged terms via text and phone calls, and an informal terms sheet. Between April 26 and 28, Ruparell’s lawyers revised a share purchase agreement to reflect the latest negotiated terms but, before the parties could sign, the proposed vendor got a better offer from another dealer, and refused to sell to Ruparell.
Reassuringly, the judge focused on the course of conduct between the parties: “Every case turns on its facts and an analysis of the parties’ intentions”. After a detailed summary of the evidence, the judge found a binding and enforceable agreement for the sale of the dealership to Ruparell.
First, a contractor agreement can be made through verbal, text or email exchanges, written documents, the conduct of the parties—or any combination thereof.
Second, there is a long-held tradition in common law jurisdictions called the “Statute of Frauds”, which generally maintains that any transactions involving answering for the debt of a third party, lands and premises, and wills and estates must be in writing. But even here we can find exceptions in the case law and, in Ontario, the requirements for written agreements have been largely tempered over the last 21 years by the Ontario Electronic Commerce Act.
Third, there must be an offer, acceptance of that offer, and consideration of that offer. The Ruparell case displayed all of these.
Fourth, in tender law, Canadian courts have applied a Contract A/Contract B formula whereby a bidder can have certain contractual rights pursuant to Contract A without a formally signed contract.
Fifth, the following three elements need to be met for an enforceable agreement:
1. an intention to be bound;
2. drafting of a formal contract is not a condition precedent; and
3. all essential terms have been agreed upon.
Let’s say you have agreement on the scope of work, a general price, timing… these are enough to suggest you are in an enforceable contract.
Dan Leduc is a partner in the law firm of Norton Rose Fulbright LLP, and practices exclusively in the area of construction law. He is always happy to take on new clients from anywhere in Canada. Contact Dan at firstname.lastname@example.org.