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Can a supplier contract exist without putting it in writing? August 23, 2010

Posted by Mark Hillary in IT Services, Outsourcing.
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Let’s shake on it. It’s a common enough agreement and it seems offensive to shake a on deal and then to refuse to take any further role in the business agreement until a contract is in place, but is the contract essential? Does the handshake really mean anything in law?

I have found myself in a situation several times where a company suggests that I work on a project, I do some work immediately because there is a sense of urgency or a deadline, and when we start talking commercials the agreement falls down. That can be annoying for me, as well as disappointing for the company I am working for, but does it always need to be like this?

It’s also common in outsourcing to find that these agreements are put in place and never documented. Either it’s because the supplier begins work urgently, before the formal agreement is signed, or there is some informal service agreement that is not in the contract. It can also be that two firms with an agreement carry on working after their official contract expires.
So if the contract doesn’t contain a specification of what is required or the contract has expired then is there really any contract at all?

Implied contracts do exist when parties have agreed orally or carried on working past the life of a contract, but it’s important to remember, the same terms don’t apply. Just because a condition was in the original contract, does not mean it can be applied when there is a dispute over the ongoing service.

So the handshake does have some value, even in law, but cannot replace a formal service contract.