A Legally Binding Contract That You Didn't Mean to Enter?

The old saying "Be careful what you wish for" is often credited to The Monkey's Paw by W.W. Jacobs (1902), though its origins are likely much older. Whatever its source, the message remains timeless: think carefully about the possible consequences of your actions.

When most people think of a contract, they imagine a lengthy written document signed by both parties. But that's not always the case. In fact, a legally binding contract can be formed far more easily than many realise — sometimes even verbally — and the consequences can be expensive. This is particularly true in areas like verbal business energy contracts, where in one short call a business owner can agree to a change of supplier, a new tariff, or even a multi-year deal. These conversations are often recorded and, as Purely Energy highlights, may legally bind both parties to the terms even without a written signature.

Forming a contract: The Offer

A contract is created by offer and acceptance.

The offer can be oral or written, and made either explicitly in words or implied through conduct. The person making the offer may be bound if a reasonable third party would believe they intended to be, and the offer is then accepted. For verbal energy contracts, this means the sales agent should provide a clear offer, with transparent terms such as contract length, exit fees, and rates explained over the phone.

For example:

Frustrated at being unable to sell his two-bedroom townhouse, Simon told his neighbour Steve in the pub: "If you find me a buyer, I'll give you a million pounds." Clearly, Simon did not genuinely intend to be bound by this statement. Therefore, even if Steve did find a buyer, Simon would not be legally obliged to pay £1,000,000.

Forming a contract: The Acceptance

There are many ways to accept an offer. The most common include:

• Confirming verbally or in writing
• Taking action that fulfils the agreement

For example:

Elaine meets gardener Eddie and says: "I'll give you £30 to trim my hedges while I'm away next week."

Eddie could accept by:

1. Replying "Yes, I’ll do it next week"
2. Texting Elaine to confirm
3. Simply turning up and trimming the hedges

If Eddie does the work, Elaine must pay the £30 agreed. Similarly, with energy contracts, clear acceptance may come in the form of answering “Yes” when the agent asks, “Do you agree to these contract terms?” — which can be enough to legally bind you.

Revoking an offer

If you change your mind, you must clearly communicate the withdrawal of your offer before it is accepted.

For example:

Alison offers Kenzie £40 per clean for fortnightly house cleaning starting next month. Before Kenzie accepts, Alison loses her job and decides she can’t afford it. As long as Alison clearly withdraws the offer before Kenzie accepts, no contract exists.

It’s best to revoke offers using instant communication such as a call, text, or email. Once revoked, the offer cannot be accepted. In the case of business utilities, Purely Energy notes that customers should not feel pressured to agree “on the spot” — having time to consider the terms is part of fair practice.

Getting out of a contract

Contracts are legally binding, so it’s rarely easy to walk away. That’s why caution matters — both in what you offer and what you accept.

If you do find yourself tied into an agreement unintentionally, there are limited ways to challenge it. For example, some business owners who feel they were rushed into a verbal energy agreement later discover they misunderstood the terms or that the supplier failed to provide full information.

1) Capacity

Both parties must have the mental capacity to form a contract. If one lacks capacity (e.g., due to illness or dementia), the contract may be void.

2) Unilateral mistake

If one party clearly misunderstood the terms and would never have agreed otherwise, the contract can be challenged.

For example:

Jim offers Helen "500" for her yacht. Helen assumes £500,000; Jim meant £500. Because Helen misunderstood the terms, she can avoid the contract.

3) Mutual mistake

If both parties misunderstand each other, no true agreement has been reached, and the contract is void.

Damages for breach of contract

If a contract exists and you breach it, ignoring the problem won’t help. The other party may take legal action, leaving you liable for damages and costs.

What damages can be claimed?

Courts generally aim to place the innocent party in the same financial position they would have been in if the contract had been fulfilled. In energy cases, that may mean covering lost fees or supply costs.

For example:

Kennedy agrees to pay Naseem 10% of a car’s sale price as a finder's fee. Naseem finds a buyer, but Kennedy backs out and refuses to pay. Naseem can claim the finder’s fee plus legal costs.

Be careful what you wish for!

As shown, contracts can be formed much more easily than people think. Key tips include:

• Be careful what you say or agree to — even over the phone
• If you change your mind, clearly revoke any offers
• Never ignore a contract you’ve entered into
• If you feel you have been mis-sold a verbal business energy contract, seek advice immediately. Purely Energy can help evidence your case to the supplier or escalate matters to the Energy Ombudsman
• If in doubt, seek independent legal advice (e.g., Citizens’ Advice Bureau)