Put it
in writing
24/02/2004 The Star Articles of Law with Bhag Singh
IN the past, transactions
were mainly carried out verbally based on mutual trust. This is in contrast
to the situation now where there is an increasing usage of documents in all
transactions.
Agreements and contracts are the basis of almost all business transactions
these days. Yet it is said that an agreement or a contract need not always
necessarily be in writing.
A reader would like to know whether a contract can be made orally or whether
there are exceptions to the rule. Apart from that, if contracts can be made
orally, what is the advantage in making a written agreement?
Properly drawn up agreements in writing do not only have an advantage but
are usually extremely necessary and to a point unavoidable. This is because
in certain transactions the arrangement may have so many details that to have
the agreement in writing would be the best way of recording not only the obligations
of each party but also what has been precisely agreed to.
In any event even where the matter may not be very complex it would also be
advisable to have a written agreement.
If this is not done there may be conflict of oral testimony from the parties
involved.
When this happens, the court will have to decide which witness is more likely
to be telling the truth. Of course the evidence of witnesses will be cross-examined
as well as scrutinised by the judge in the light of available collaborative
evidence .
However, the task of the court can become more challenging when the available
evidence is evenly balanced and the material witnesses contradict each other.
In such a case the court will have to make an assessment of each witness and
decide which of the two witnesses is to be believed.
The other question is whether there is any legal compulsion for an agreement
to be in writing. To a limited extent there is a need for an agreement to
be in writing.
There are four situations where an agreement is not enforceable unless it
is in writing. Of course writing is today defined to include and record an
occurrence or event or arrangement in an electronic form.
According to the Interpretation Act1967, “writing” or “written” includes type-writing,
printing, lithography, photography, electronic storage or transmission or
any other method of recording information or fixing information in a form
capable of being preserved.
One instance where an agreement is required to be in writing is where an agreement
is made on account of natural love and affection between parties standing
in near relation to each other. This is if there is absence of consideration.
Whilst the interpretation of natural love and affection as well as parties
standing in near relation to each other has been the subject of separate discussion
on several occasions it covers what would otherwise be a domestic or family
arrangement.
This is where a promise is made by a husband to a wife or vice-versa to make
what would otherwise be regarded as a gift so that the promise would be enforced
as if it were a commercial transaction.
Another situation is where a person has voluntarily done something to assist
another person. In such a situation the person who has voluntarily performed
the act cannot claim payment for his initiative.
However, if the person helped makes a promise to pay or reward the person
who helped him, then such a promise can be enforced if it is made in writing
even though there is no direct or immediate consideration.
A third situation is where a claim has become time barred. In such a situation
the debtor is under no obligation to make payment. However, even though the
claim has become time barred the debtor may agree in writing to pay. Such
an agreement if in writing would be enforceable even though there is no consideration
for the undertaking to pay the debt. However, once in writing it becomes a
binding and enforceable agreement.
In these situations it would be apparent that in the context of the agreement
made on account of natural love and affection it provides a means of making
an agreement enforceable because of the generally accepted principle of non-existence
of intention to create legal relations.
Where a person does something voluntarily there is obviously no consideration
involved. However, such a promise to be paid if written must be honoured.
Thirdly an undertaking to pay a time-barred debt is necessarily an acknowledgement
of a debt which in terms of the Law of Limitations has the effect of reviving
a debt. The provisions in the Contracts Act 1950 have the effect of making
the principle consistent.
Finally an agreement to refer a dispute to arbitration must also be in writing.
This is because the Arbitration Act 1952 provides that “an arbitration agreement
means a written agreement to submit present or future differences to arbitration,
whether an arbitrator is named therein or not.”
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