Can a contract be binding without a signature?

Can the terms of an unsigned contract still be binding on an employee?  This was discussed in the recent High Court case of FW Farnsworth Ltd and another v Lacy and others. 

Mr Lacy had begun working with the company in 2003, and signed an initial contract of employment at this time. As he was employed at this time in a low level position, his contract contained no Post Termination Restrictions. In 2009 Mr Lacy was promoted to a more senior role and issued with a new contract of employment, which contained numerous new clauses, relating to benefits, bonuses etc and also included Post Termination Restrictions. 

Mr Lacy did not sign the contract. He then decided to leave employment in 2012 and begin working for a rival company. This was of course a breach of his post termination restrictions. 

The High Court recognised that despite Mr Lacys lack of signature he was bound by the restrictive covenants of the contract. This was because his conduct since 2009, i.e. receiving additional benefits, wages etc that were enclosed in the contract meant he had inferred agreement to the terms of the contract. 

Whilst it is always the recommended procedure to have a signed contract of employment in place, this case demonstrates that, in the fall back position, the employer will still have some protection. 

Published: 25 Oct 2012


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