The Widget

The Widget - contract tips

  1. Introduction

    A contract that binds two parties can be formed in a number of ways: by written agreement, by email correspondence, sometimes by spoken discussion alone, and sometimes by a combination of events. Contracts can sometimes be formed between two parties unintentionally. The reason why it makes sense to have a proper written agreement is that it gives certainty to both the existence of the contract and the terms of the contract.

  2. Drafting your contract

    1. When you are asked by the Widget contract wizard (or you have separately chosen) to write out your own wording in any contract, write as simply as possible in plain, clear English, and avoid using any legal jargon you might know. Plain English is often more reliable than "legalese".
    2. Where there are textbox answers we have given examples of how your answers should be worded. Sometimes to make the Widget work properly we ask you to type in specific words in your text, or to start with a specific set of words, so please do so in order to ensure that the final contract wording makes sense.
    3. If a party, person or concept is already described by a defined and capitalised term, for example "Company", use the defined term rather than an alternative - you will see which the defined terms are by looking at the clause you are working on. If you use different words to refer to the same person or thing the reader may think you are referring to different persons or things. In contracts, terms are defined for consistency, and to save time writing out complex meanings each time the reference is made.
    4. Re-read what you have written to check that it makes sense. Check also that it does not contradict any other parts of the contract. If it does contradict, and you intend that contradiction because you want your new wording to prevail, preface your new wording with the words "Notwithstanding the provisions of clause x" where "x" is the contradicted clause. Do this rather than deleting the contradicted clause.
  3. Exchanging drafts

    1. When you send a draft of the contract to the other party to consider you should mark your covering correspondence clearly with the words "Subject to Contract". This legal convention has the effect of notifying the other party that you are not yet committing to the deal or the wording of the contract, and that the other party should not assume any deal is agreed until you actually sign the contract.
    2. A note of warning: If you head your correspondence "Subject to Contract" but at the same time (and before signature) you begin to carry out the acts described in the contract, you may in some circumstances be deemed to have agreed the deal (and therefore to have entered into a binding contract) by implication or by spoken agreement (despite using the "Subject to Contract" wording). The law says that a simple oral exchange or an exchange of emails can create a contract in some circumstances. To minimise the risk of creating a binding contract before you intend to, keep the "Subject to Contract" title on all your emails, and if possible do not proceed with any agreed actions, until you have a fully signed contract. A significant amount of the work we lawyers do is sorting out disagreements between parties as to whether a contract exists between them, and if so, what the terms of that contract are.
  4. The entire agreement

    1. All the Widget contracts contain an "entire agreement clause" which states that all the terms that the parties have agreed are set out in the contract. The clause is included in an attempt to prevent one party later claiming that an additional point was agreed (perhaps orally or by email) but never made it into the contract. The clause is never 100% watertight because in some cases where an additional term is claimed to exist, judges decide that a secondary contract exists alongside the main contract which encapsulates the additional point, but generally speaking it is effective. You should therefore ensure that all deal points are included in the contract if you want to be sure you can enforce them.
    2. If you agree any changes to the deal after the contract is signed you should set them out in a short letter agreement which (a) refers to the contract and (b) clearly states that it is intended to amend the contract and (c) sets out the agreed changes. All parties should sign the letter agreement.
  5. Signing the contract

    1. When you are satisfied that (a) all commercial terms are agreed and (b) they are all recorded in the contract and (c) the wording of the contract accurately reflects those terms and makes sense, you are ready for signature.
    2. The normal procedure is for each party to the contract to have their own fully signed counterpart (i.e. original). You should therefore print off and bind or staple the required number of copies of the contract (one for each party) and circulate them for signature by each party. The covering letter should no longer be marked "Subject to Contract" and should make it clear that the documents are in the agreed form and that they are being circulated for signature.
    3. The final part of closing a contract (and a step which often goes wrong) is dating the contract. In English law a contract is made on the date that the last of the contract parties signs the contract. This date should be written in at the top of the front page on all counterparts. It is usually unlawful (and therefore ineffective) to write in any earlier date.
    4. If the signature process works properly, the result should be that each party ends up with their own fully signed counterpart of the contract, and all counterparts carry the same date. If any copies of the contract are unsigned or undated it is not necessarily fatal, but it could make the task of enforcing the contract (if you ever need to do so) more difficult.
    5. Keep your counterpart of the contract in a safe place in case you should need to refer to it at a future date. The Widget allows you to upload a scanned copy of the signed contract to sit next to the draft on the system, so you can use the Widget as your contract library if you like. The search tools allow you to find earlier contracts quickly by several different search criteria.
    6. It is also helpful to keep a bullet point summary of the key commercial terms of the contract in a separate note for easy reference. We’re working on ways for the Widget to include these contract summaries, so watch this space.

What they say

The Widget is a great resource for me and my team - it's innovative and easy to use, it eliminates the risk of using out-of-date wording and it saves us money. There is no doubt that this type of innovative product helps to strengthen client relationships.

Fidessa Plc - Wayne Coomey