General legal issues

Legal relations

Legal relations

One party may agree to pay cash, provide a service, supply property, or supply goods or facilities, either on a temporary or permanent basis in exchange for the other party carrying out one of those activities on a temporary or permanent basis.

  • Apart from an intention to create legal relations, it is also necessary that all the precise terms of the agreement are clear so that everyone knows what they have to do.  This is essential if the courts are going to have to interpret and enforce the agreement.  The basic options are: a clear statement of precisely who is to do what; a statement that a party is to do something in a reasonable manner; or a statement that the parties will either agree something, or that if they can’t agree, a third party will determine the matter.
  • Contracts cover a huge range of activities and potential activities.  This has resulted in a broad legal framework which is very complex, covering a wide range of both openly commercial and less commercial activities, and addressing the relationships within those areas of activity in a great deal of detail.
  • As a result of this complexity, the law relating to contracts has grown up in different practical environments, so some of it is very specialist.  However some legal doctrines that have grown up in the area of human endeavour will be effective in other environments.
  • There are for example different contract terms implied into leases (rules relating to forfeiture, or termination by the landlord) and sales of goods (rules relating to the quality of goods).  Both types of contract are, however, also subject to similar rules where one party has deliberately misled the other with respect to the contract or its subject matter.
  • Risk management is essential to manage uncertainty.  This involves planning the nature of these relationships and ensuring that there is documentation recording the legal relationship in place, which is as effective as it can be in the circumstances.
  • In the case of complex and high value or high risk contracts, organisations should consider whether legal advice is appropriate.
  • The varying tax treatment of various contractual relationships is the result of the diversity of practical environments in which contracts arise.  It does not directly overlap with the law of rights and liabilities regarding the occupation and use of property.