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Recently the world watched as Donald Trump, President of the United States of America and Kim Jong-Un, leader of North Korea signed a key agreement in Singapore (“Singapore Agreement”). This agreement contained provisions for peace and the denuclearisation efforts between both nations. We thought it would be interesting to explore to what extent the Singapore Agreement would be a legally binding agreement under English law.
For a contract to be enforceable in a court of law, it must be made between two or more parties where there is an intention to create a legally binding contract. There are further key elements required, which include:
An offer is exactly that, one party opens the dialogue to the other with an offer to enter into a contract on certain terms. The terms of the offer must be specific and complete, and will usually contain the basic terms of the agreement to be entered into. Both parties must be certain in respect of the terms entered into, and have a full understand as to what they mean.
After an offer is made, it is up to the other party to decide whether to accept that offer. Once an acceptance of the offer is communicated, a legally binding contract will usually have been formed. Sometimes conduct may be considered as acceptance, but only if it is clear that the party did the act in question with the intention of accepting the offer. In the case of the Singapore Agreement, the terms of the offer by both parties will be contained in the agreement itself and the signature of that agreement will constitute acceptance of the offer.
Consideration means that both parties to the contract must gain something by entering into it. This, in simple terms, means that a party to a contract cannot enforce it unless he too has given or promised something in exchange. Courts do not like to interfere in bargains made between parties so it is not a requirement for consideration to be ‘adequate’ or equal in value. Although money is a popular form of consideration, a promise to exchange anything of value to the other party will usually amount to valid consideration.
In the Singapore Agreement, both nations have promised to take steps towards denuclearisation, prosperity and peace. As each party has agreed to take positive actions to end hostilities, which will involve tangible efforts on both sides that will ultimately be to the benefit of the other, these actions will be deemed as valid consideration.
Intention to create legal relations
A contract cannot be formed without the intention from both parties to create legal relations and enter into an arrangement which may be enforced by the court if one party fails to keep their side of the deal. Mike Ashley of Sports Direct was recently sued by an investment banker who argued that Mike Ashley had agreed one night in a pub to pay him £15m if he could help get the Sports Direct share above £8 per share within three years. In that case the court ruled in favour of Mike Ashley on the basis that this was pub banter and there was no intention to create a legally binding contract.
In the case of the Singapore Agreement, the parties are publicly signing the agreement and so appear to be demonstrating an intention to create legal relations.
Certainty of terms
The Singapore Agreement appears, on the face of it, to tick all the boxes above in respect of it being a valid contract, however the question that remains is whether there is sufficient certainty of terms for this contract to be legally binding. There has been speculation on the lack of detail in the Singapore Agreement, which, some have reported, does not appear to contain any express promises from North Korea to abandon its nuclear weapons program, rather, it is said that the agreement allows for further negotiations in the future. If and to the extent that this is the case, then the Singapore Agreement may not be legally binding under English law because an agreement to agree is not normally enforceable by the Courts.
To be sure of forming a valid contract make sure the following key elements always coincide:
If you have any questions on this article please get in touch with the Corporate and Commercial team at Hughes Paddison Solicitors.