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This guide will help you to understand key points of contract law explaining your statutory rights, whether you have a contract, and terms and conditions. It will also tell you what to do when things go wrong.
We all make agreements with other people every day. However, not all of those agreements will be contracts. The difference between a casual agreement and a contract is that a contract is a legally binding agreement. This means:
Case study 'When my boiler broke down, one of my friends from work put me in touch with her mate, Mike, who was a plumber. Mike popped round the next day and did a couple of hours’ work. When he finished the boiler seemed to be working fine, so I paid him the sixty quid we had agreed on. A couple of weeks later the boiler broke down again. I called Mike but he he said he didn’t have time to come and look at it. I had to call out an emergency plumber. I was told that Mike’s botch repair job had damaged the boiler so badly that I would have to buy a new one. When I called Mike to complain, he said he didn’t owe me anything because he had only been doing a favour for a mate, and we had not signed a contract. In the end, I took him to court. It was a difficult and stressful process, but thankfully, the court said I did have a contract - even though I had not signed anything. They said that Mike had broken the contract by doing poor quality work and damaging my boiler. I got compensation to cover the cost of a new boiler, the money I had to pay the emergency plumber.'
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The information in this know-how guide applies to England and Wales.
Case study 'I wanted to get a conservatory built at the back of my house and was shopping around for the best deal. One company sent over a couple of builders to have a proper look at my house and measure up. After a couple of hours they gave me a written estimate of £12,500. This was the lowest quote and I liked the firm, so I rang up the next day to tell them to go ahead on the basis of their estimate. Just before building started they rang me and said that they were going to have to charge me £15,000 because the company supplying their materials had put its prices up. I took some legal advice and was told that I had a contract with the glazing firm for them to build the conservatory for £12,500. Their written estimate was an offer, which I had accepted, and it was too late for them to change their minds. When my solicitor wrote to the firm about it they said they would to do the work for £12,500 as agreed'. Ahmed, Solihull |
There are four basic building blocks needed for a contract and if they are not all there, it is not a contract.
The first step towards creating a contract is for someone to make an offer - to mend a boiler, buy a car, give you a job, and so on. The offer needs to be clear, firm and final. It will not be a proper offer if it is too vague or if important information, like the price, is missing.
The next step is for someone to accept the offer. This is the moment when the contract is created. Usually it is obvious when this has happened. But sometimes it can be difficult to work out exactly when the contract is made. This matters because as soon as there is a contract, you can not get out of it or change it, unless the other person agrees.
Price tag myth
If you walk into a posh shop and see a designer jacket with a £10 price tag you might think your luck's in and the shop has to sell you the jacket at the marked price, even though it is obviously a mistake. In fact they do not have to - if the shop assistant realises the mistake before you pay, they can refuse to sell it at that price. This is because, legally speaking, you are offering to buy the jacket for £10 and the shop is free to accept or reject that offer. Sometimes this happens because a shop makes an innocent mistake with its labelling. But if you find that a shop is doing this regularly it might be a deliberate con and you could report them to Trading Standards.
An agreement is not legally binding contract unless both the person offering and the person accepting are exchanging something of value with each other. This is the 'price' paid under the contract. Lawyers sometimes call it the 'consideration'. The price does not have to be money, although it often is. So for example, in an employment contract, the 'price' paid by the employer to the employee is wages and the 'price' paid by the employee back to the employer is the work he or she does. If the ‘price’ paid is money, it does not have to be at the full going rate or the market value. But it cannot be a gift.
The price might be a promise to do something for the other person in the future. For example, if you book tickets for a concert, you pay money to the ticket agency and in return they promise you will be let into the concert. But it will not count as a contract if the promise is for something that has already happened.
It will not count as a contract if the promise is for something that has already happened and if someone gives you something for nothing, or promises to, it is not a contract because only one person benefits. For example, if a friend promises you that you can have their old mobile phone, and then they give it to someone else instead, you will be pretty upset. But you don not have any legal right to the phone because your friend was not going to get anything from you in return (gratitude does not count!). If you agreed to pay your friend for it, no matter how little the amount, it would have been a contract.
You may be able to get out of a contract if you entered into it, when you:
If you are in this position, try to get advice. See our Help directory for useful contacts.
Lastly, the people making the contract have to intend it to be legally binding. This means that they would want the right to take the other person to court if they do not keep their side of the deal. This is why many of the everyday agreements we make with our families and friends are not contracts, even if the other building blocks are there. You might agree with your friend in the pub 'you buy this round and I will get the next'. Your friend might be pretty fed up if you go home without buying your round, but they would not want to be able to take you to court over it!
Sometimes it is obvious when a contract is made - like when you sign a lease or an employment contract. But it is not always so clear. We enter into contracts all the time without even thinking about it.
There are some situations where you can, unknowingly, get stuck with a contract that you do not really want.
Common situations where you may make a contract without realising are:
‘But I have not got anything in writing!’ It is a common mistake to think you have not got a contract because you have not got anything in writing. In fact, most contracts do not have to be in writing and many are not (just like the first example above, when the whole contract was completed without anyone writing anything down). As long as you have a clear agreement and the building blocks for a contract are there, you will have a contract whether it is in writing or not. Having said that, it is always a good idea to get something in writing if you can - it helps to show what has been agreed if there is a dispute about it later on. If you have not got anything in writing, it often ends up being one person’s word against another. If you are an employee, you have a contract of employment whether or not it is put into writing. You have a right to ask your employer to put down the main terms of your contract in writing if this has not been done already. However, some agreements like leases, contracts to buy property, and consumer credit agreements must be in writing. |
Solving real-life examples
‘My neighbour's son is fitting some new windows for us but it's all very informal and we haven't been given anything to sign. Will we have any rights if things go wrong?’
As long as you have a clear agreement with the fitter - including how much you are paying - then you will have a contract even if you have nothing in writing. However, you should think about writing down what has been agreed in a letter - including the price, a description of the work and the date you have agreed it should be done by - and giving it to the fitter. (Keep your own copy). This will help avoid any argument about what was agreed further down the line. If you pay cash, you should ask for a receipt, even if this is handwritten.
This is the person or organisation that you entered the contract with. Sometimes it is obvious or easy to find out because you have a written contract which clearly shows who made the offer, who accepted it and what ‘price’ was agreed. But sometimes it is not easy to know who your contract is with. A good way to find out is by writing to anyone who you think your contract might be with and explain the issue. They should tell you whether or not they are the person or organisation who your contract is with. You can also use some of the tips in our guide on Who to sue to help you identify who your contract is with.
Solving real-life examples
‘I recently took a faulty computer back to the shop I bought it from, but they told me I have to take it up with the manufacturer. Who is my contract with?’
When you buy something in a shop, your contract is with the shop, so if there's a fault, it's up to the shop to sort things out. In some situations the manufacturer may also be responsible -but your first point of call should always be the shop.
Case study "I wanted a new phone and decided to switch to a cheaper network, so I rang my old provider and told them I wanted to cancel my contract. I was surprised and upset when they refused. They pointed out a bit in their terms and conditions which said that once you start paying for the phone contract you cannot get of it unless you pay for all the remaining months in one go. In other words, I was stuck with my old provider unless I paid them £380. I wish I had read the terms and conditions in the first place because then I would have got a 12 month contract instead of a 24 month one".
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Sometimes we are in too much of a hurry or too embarrassed to read through pages and pages of small print before signing something.
But if you sign a contract you will normally not be able to claim later that you did not agree to what is in it, even if you had not read it at the time.
Reading before you sign is the only way to make sure you are not agreeing to something you do not want to.
'Terms and conditions' is a phrase often used to mean the rights you have under the contract and also what obligations you have. For example, if you order a new cooker, it might be in the terms and conditions that the cooker will be delivered within a week (that is your right) but it might say that someone has to be at home to take the delivery (that is your obligation). Terms and conditions might be individually negotiated, for example if you negotiate with each other over the price. Or they might be already set out, like when a company has a standard set of terms and conditions, which are the same for every customer. Every contract has terms and conditions - whether it is in writing or not.
If you have a written contract you would think it would be pretty easy to find out what the terms and conditions are. Sometimes it is, because all of the terms and conditions are usually written down in one place. But often, they are hidden away in "the small print".
The small print often contains the most important bits of your contract - for example, what you can do if you change your mind about what you have bought.
If the small print has been drawn to your attention, when you make an agreement, it will usually be part of your contract.
If you feel that you have been duped into a bad deal because you missed something in the small print, see Unfair terms and conditions below.
Sometimes, as well as being in small print, terms and conditions are found in places you might not think of looking.
For example, if you turn a ticket over you may find some of the terms and conditions on the back of it - it may tell you whether you are entitled to a refund if the event is postponed, or whether the venue can throw you out if you get too rowdy.
Solving real-life examples
‘I signed up for a twelve-month gym membership in January but am moving away from the area and want to cancel. What can I do?’
You need to check the small print of your agreement with the gym.
If it says you can cancel your membership during the year then you can - although you may find there is a penalty for doing so.
If not then you'll have to keep paying for the full year unless you can reach some agreement with the gym.
If you just stop paying, you'll almost certainly be in breach of your contract. What will happen due to this breach will depend on what is says in your membership agreement. It may say that you may have a pay a fee on demand, your membership will be suspended or terminated (which likely means you will also have to pay an early termination fee), or a referral to a debt collection company.
Notices displayed in places like shops, hotels, theatres and car parks can also be terms and conditions. Here are a few examples:
Provided the notice is clearly visible when you are handing over your money, or parking your car, it will form part of your contract.
The law can cancel out certain terms and conditions that are ‘unfair’ to protect people. For example, if the contract gives one person the right to end the contract whenever they like, but the other person cannot do that, it is likely to be unfair. Contracts can often be unfair when they are between a company and a ‘consumer’ (a consumer is an individual who is buying for themselves, not for their business). If you feel you have got a raw deal from a contract, it may be worth seeking advice from an adviser - even if you have agreed to the terms and conditions you think are unfair.
‘Is it legal?’ Even if you have a contract, the courts may not be able to help you if your contract is ‘illegal’ - if it contains an agreement to break the law. A common example of an illegal contract is when a worker agrees to be paid ‘cash in hand’, knowingly avoiding tax and National Insurance. If you have an illegal contract, you will almost certainly lose your right to get compensation from the other side if something goes wrong. |
Warning!
You have fewer statutory rights when you buy goods privately. This means that the seller is not acting in the course of their business. The difference is that the thing you are buying only needs to be ‘as described’. For example, it is a private sale when you buy a car from an individual owner who is not in the car trade. Also, watch out for traders posing as private sellers - they may be trying to make you think you do not have rights when you do!
As well as the terms and conditions that you agree, the law sometimes automatically puts other terms and conditions into your contract to make it fairer (even if your contract is not written down, the law still inserts these terms into your contract). These are often referred to as ‘statutory rights’. You can rely on these rights whether they have been agreed or not. Statutory rights usually come up when you are buying goods or when you pay someone for a service, like a holiday company or a builder. Here are a few examples of when your statutory rights would apply:
If you buy something and later realise it is faulty, it is your statutory right to take it back to the shop and get your money back, no matter what the shop’s refund policy is. But if there is no problem with the goods and you simply change your mind, the shop only has to follow its own refund policy. This is often set out in a notice next to the till and is one of the terms of your contract.
‘Distance selling’ is when a product or a service is sold through the TV, by mail order, over the phone or through text. ‘Online selling’ is selling a product or service through the internet. There are laws to protect you when you buy something through online and distance selling.
The distance selling rules set out above also apply for online selling. And on top of that there are some extra rules to protect you when you buy online:
Case study I was looking around for a streaming service to sign up for and I came across a few that I was considering. I know from buying products online that you usually get 14 days to cancel your order with no charge, so I thought to sign up to one, give a whirl for a few days or so and if I didn't like it, then I'll just cancel it, get my money back. and get the other one. After signing up and watching for a few days, I wanted to cancel this streaming service, but I was told that the 14 days right to cancel is lost after you stream content and that it was contained in their terms and conditions. I hadn’t realised the rules were different for online streaming! Liz, Cambridgeshire |
GOV.UK sets out what a seller must do before and after and order is placed and deals with cancellations with online and phone, TV, text message or mail order purchases. It also sets out the exceptions that these rules in both cases do not apply to.
If you believe that the provider has not followed these laws then it may amount to a breach. See our section below on Breach of contract on what to do.
Be aware that if you make a contract with someone in a different country, a different law may apply.
The UK has left the EU, but at the moment most of your consumer rights remain the same. For example, you will still have specific rights on faulty goods and cancellation rights.
When you buy something online from a country in the EU, it is unlikely that you will be able to make a claim about an EU product in the UK court system.
You MUST always check the terms and conditions offered by the seller, and the standard terms of the seller’s EU country also. This is to find out which country’s law will apply as your protection will be different from when you buy from a UK retailer.
If you buy something from a country outside the EU, the law for the country you are buying from will affect what your rights are. For example, if you buy something from New York, US consumer law will apply.
When you buy something, the contract usually happens very quickly - you hand over your money and you take the item you bought. But some contracts can go on for a very long time, like a lease or an employment contract.
These longer contracts can come to an end in a number of different ways; here is a summary of the most common:
If you are stuck in a contract that you are not happy with and you do not know how to get out of it, you should get in touch with an adviser - see our Help Directory. There may be a way of ending the contract legally. If you just stop fulfilling your side of the bargain, the other person might be able to take you to court.
A breach of contract happens when one of the people or organisations in the contract fails to do something in the contract. This breach can be something that is agreed intentionally either in writing or verbally in the contract or something that is implied by the law. These are called ‘express terms’ and ‘implied terms’. If something is ‘implied by the law’, this means that the entirety of the law does not need to be written or said , but it still needs to be obeyed by all people who are in the contract. Implied terms are just as important in a contract as express terms.
If the person or organisation you made the contract with breached it, you may be entitled to a replacement or repair of the goods, repeat of the service, or partial or full refund depending on the circumstances.
What is misrepresentation?
Misrepresentation is when you are told something untrue or misleading before you enter into a contract. If someone says something which isn't true, and you go ahead with the contract because of what they have said you may be able to claim compensation for misrepresentation.
The information in this guide applies to England and Wales.
The law is complicated. We have simplified things in this guide. Please do not rely on this guide as a complete statement of the law. We recommend you try and get advice from the sources we have suggested.
The cases we refer to are not always real but show a typical situation. We have included them to help you think about how to deal with your own situation.
 |  | May 2023 This short guide was written and produced by Advicenow and |
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