Not all commercial contracts need to be in writing to be considered legally binding. Oral agreements can be enforceable if they include the essential elements of a contract: offer, acceptance, consideration and intention to create legal relations. However, there are significant advantages to having written contracts:

• Clarity and certainty: written contracts provide a clear record of the terms agreed upon, reducing the potential for misunderstandings and disputes.
• Evidence: in case of a disagreement, a written contract serves as solid evidence of the parties' intentions and what was agreed.
• Specific legal requirements: some types of contracts, such as those related to the sale of land, consumer credit and others, are required by law to be in writing.

While a commercial contract does not always have to be in writing to be legally binding, having a comprehensive written agreement is best practice, and will be the most effective way of protecting your business interests and avoiding disputes.

For a contract to be considered legally binding, certain elements must be present. Understanding these can help ensure that your commercial agreements are enforceable and protect your business interests. Here are the key components:

• Offer and acceptance: one party must make a clear offer, and the other must accept it. Acceptance must be unconditional and correspond exactly to the offer.
• Consideration: there must be something of value exchanged between the parties. This can be money, services or goods, as long as each party gives and receives something.
• Intention to create legal relations: both parties must intend for the agreement to be legally binding. In a business context, this is typically presumed.
• Capacity: the parties involved must have the legal capacity to enter into a contract. This means they must be of legal age (over 18 in the UK) and of sound mind.
• Consent: the agreement must be made without duress, undue influence or misrepresentation. All parties should agree to the terms freely and with full understanding.
• Legality: the terms of the contract must be legal. A contract for illegal activities is not enforceable.

While a written document is not always necessary for a contract to be legally binding, it can provide clarity and evidence of the terms agreed upon. At Walker Foster, our commercial contract solicitors can help ensure that your business agreements meet all these criteria, to provide security and clarity for your business operations.

Understanding the distinction between a partnership agreement and a limited liability partnership (LLP) is vital when forming a business relationship.

Partnership agreements: in a conventional partnership, partners work together with the intent of generating a profit. A partnership agreement helps to outline how the business will be run, covering both high-level financial and operational strategies as well as certain day-to-day management aspects.

Without such an agreement, your partnership will automatically be governed by the Partnership Act 1890, which might not suit your business's unique needs. Furthermore, without a formal agreement, you risk creating unintended terms through your business's conduct.

LLP agreements: an LLP stands apart from traditional partnerships primarily because it is a separate legal entity. This means that the LLP itself, rather than the individual members, enters into contracts and holds liability to third parties. Members (often still called partners) are generally not personally liable to third parties, which offers a layer of protection not available in traditional partnerships.

However, members can become personally liable in certain situations, such as if they provide personal guarantees or engage in wrongful or fraudulent trading. Governed by the LLPA 2000 and LLP Regulations 2001, LLPs provide a structure that can be more flexible and protective for business owners.

While LLP agreements can be oral or inferred by conduct, having a written agreement is highly recommended to clearly outline the rights and responsibilities of all members. A well-drafted LLP agreement helps to reflect the true intention and objectives of the business partnership.

Whether you are forming a traditional partnership or an LLP, it is essential to have the right legal documents in place. Walker Foster is here to assist with drafting agreements that protect your interests and support the success of your business partnership.