What makes a business contract legally binding in Trinidad and Tobago?

The elements of a binding contract

These rules come mainly from case law. Decisions of the Privy Council, the final court of appeal for Trinidad and Tobago, bind its courts. Decisions of the English House of Lords, Supreme Court and Court of Appeal do not, but they are persuasive and are regularly applied here.

• Agreement. One side makes an offer and the other accepts it. Whether there is a contract, and on what terms, depends not on what each side privately thought but on "what was communicated between them by words or conduct", judged objectively (RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG [2010] UKSC 14 [45]).
• Certainty. The main terms must be agreed. An agreement too vague to show what the parties meant, such as a sale "on hire purchase terms" that were never settled, is not a contract (G Scammell and Nephew Ltd v Ouston [1941] AC 251 (HL)).
• Consideration. Each side must give or promise something of value in return, such as payment, goods or work. A promise made by deed needs no consideration. Something already done before the promise is usually not enough. It can count if it was done at the promisor's request, both sides understood it would be paid for, and payment would have been legally enforceable had it been promised in advance (Pao On v Lau Yiu Long [1980] AC 614 (PC)).
• Intention to be legally bound. In business dealings this is presumed, but words such as "subject to contract" usually mean there is no contract until a formal document is signed. The parties' later conduct can sometimes show that they waived that condition, though the courts will not lightly find this (RTS Flexible Systems [55]).

Who can make a binding contract

• Individuals. A person under 18 is a minor (Age of Majority Act (Chapter 46:06), s 2). A minor's contracts to repay money lent, or to pay for goods supplied other than necessaries, are "absolutely void" (Infants Act (Chapter 46:02), s 19). A promise made after turning 18 to pay a debt run up as a minor, or to confirm a contract made as a minor, cannot be sued on (s 20).
• Companies. A company has "the capacity ... of an individual" (Companies Act (Chapter 81:01), s 21(1)). It cannot escape a contract by saying its articles were not followed, or that a person it held out as a director, officer or agent had no authority to do what is customary in its business or usual for that position. The exception is where the other party knows, or ought to know from its position with or relationship to the company, the true position (s 25). A contract that individuals could make orally can be made orally for a company by anyone acting under its authority (s 26(2)(c)).
• Partnerships. Every partner is an agent of the firm. A partner who acts in the usual way of the firm's business binds the firm, unless he has no authority and the other party knows that, or does not know or believe him to be a partner (Partnership Act (Chapter 81:02), s 7).
• A company not yet formed. Signing a written contract for a company before it exists can make you personally liable (Companies Act, s 20). See Should I register a business name or a company in Trinidad and Tobago?.

When writing is required

No action may be brought on a contract "for the sale or other disposition of land or any interest in land" unless the agreement, or "some memorandum or note thereof", is in writing and signed by the party to be charged or someone lawfully authorised by that party. This does not affect the law of part performance (Conveyancing and Law of Property Act (Chapter 56:01), s 4). A company meets a requirement for a signed writing through any person acting under its authority, and can execute a contract that must be under seal with its common seal (Companies Act, s 26(2)(a), (b)).

Why a written contract is still wise

An oral contract can bind, but its terms are hard to prove. A signed document should cover:

• each party's full legal name, and for a company its exact registered name;
• the goods or services, price, payment and delivery dates;
• whether time is "of the essence", and how either side may end the contract;
• any agreed sum payable on breach, and any cap on liability;
• where and how disputes will be resolved.

Anyone signing for a company should have its authority. A personal guarantee of a company's debts should be in writing and signed by the guarantor.