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Occasionally, in commercial dealings, a contract will go unsigned. Perhaps the other person you are contracting with refuses to sign the document, or they genuinely forget to provide their signature in time. This may mean that the time and resources you have invested in forming contractual relations may go to waste. However, the absence of a signature does not always prevent a contract from being enforceable. This article will outline what elements have to be present to enforce an unsigned contract in New Zealand.

The Criteria for a Binding Contract

If you wish to enforce a contract in New Zealand, there are certain elements that you must satisfy. Your contract must contain:

  • an offer;
  • acceptance of that offer;
  • consideration towards the acceptance of the offer; and
  • a common intention for this offer to create a legal relationship between the parties involved. 

Has There Been Another Form of Acceptance?

You enter into a legally binding agreement after you accept a clear offer. In a commercial context, a signature usually indicates your acceptance. Therefore, if you wish to enforce an unsigned contract, the starting point will be to indicate something else that demonstrates that the other party has accepted the offer to enter into the agreement. 

You may point to something the other party has either said or done to demonstrate agreement. For example, commencing the work you contracted them to do. However, you cannot consider this in isolation. A court will consider these statements or conduct in the broader context of each specific case in determining whether a contractual relationship exists. 

Furthermore, you must demonstrate that this acceptance was to the essential terms of the offer. The essential terms of an agreement are those without which the contract could not eventuate. 

Was This Acceptance Backed by Consideration? 

Consideration refers to something of value. An agreement is backed by consideration when acceptance accompanies something that would be of value to the offeror. This can range from the provision of money, goods or services, a promise to provide goods or services or to abstain from something in a manner which benefits the offeror. You can think of consideration as buying the promise expressed in the offer.

To enforce an unsigned contract, you must point to something of value that accompanied the acceptance of the offer. Usually, it is not sufficient to point to the payment of money. This is because it is relatively common to pay a deposit or to commence regular payments, before entering into a binding contract. Instead, you could indicate that the other party has commenced the work you contracted them to do. Therefore, they have provided services to affirm their acceptance. The closer this work is to being completed, the more robust your case for sufficient acceptance and consideration will be. 

Is There a Shared Intention to Be Bound by This Contract?

Ultimately, for an unsigned contract to be enforceable, you must point to sufficient evidence that both you and any other contracting parties intend to be immediately bound by this agreement. 

This will depend on all of the circumstances of each case. You may be able to point to the words used by the other party, or how they concluded negotiations, to indicate that they intended to be bound immediately. It is important to note that this is an objective evaluation. Ultimately, the court will evaluate whether a reasonable person, in your position, would infer that the other party intended to be bound by the contract, and enter into a legal relationship, despite not providing their signature. 

In New Zealand, the courts may still be able to infer an intention to enter into the contract, despite there being a clause that requires a signature. Such a provision is known as a “subject to contract clause.” The contract may still be enforceable so long as you can prove that the other party or parties intended to be bound by the agreed terms, without a formal written contract. If you cannot successfully demonstrate this, then such a clause will prevent a court from finding the contract to be enforceable. 

Key Takeaways

Although it is best practice to acquire a signature when entering into a contract, this is not always necessary to enforce the agreement. However, there are requirements you will have to demonstrate in the absence of a written acceptance. You must be able to point to some other conduct that indicates that the other party has accepted your offer. Additionally, you must back this acceptance with something of value. Furthermore, you must demonstrate the intention of the other party to be bound by the contract. If you wish to enforce a contract, contact LegalVision’s contract lawyers on 0800 005 570 or complete the form on this page.

FAQs

Is an unsigned contract binding?

An unsigned contract may be binding, on the basis that it can be demonstrated that there was an acceptance of the proposed offer by some means other than a signature. This acceptance must be backed by something of value, and the parties involved must all intend for the contract to create legal obligations, despite not being signed.

What happens if a contract is not signed?

That depends on what the other contracting parties wish to do. However, the lack of a signature does not necessarily prevent a contracting party from enforcing the contract in court.

Is an unsigned document valid?

An unsigned document is valid on the basis that it has the key elements of a contract; offer, acceptance, consideration, intention to create legal relations and certainty of terms.

What does a signature on a contract do?

A signature is a way in which a party to a contract can demonstrate that they have accepted the terms of the contract.

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