“But We Never Signed a Contract”: The Expensive Mistake Businesses Still Make

“But We Never Signed a Contract”: The Expensive Mistake Businesses Still Make

“But we never signed a contract.”

It is one of the most common and costly statements raised in commercial litigation disputes.

By the time lawyers become involved, businesses are often relying on fragmented email chains, WhatsApp messages and verbal conversations to prove the existence of a commercial agreement. When disputes escalate into litigation, those informal exchanges frequently become critical evidence before the Court.

You Do Not Always Need a Signed Contract

Many business owners assume a contract is only enforceable once all parties sign a formal written agreement.

That is not necessarily the case.

Courts will often look beyond formal documents and examine the conduct between parties — including emails, text messages, purchase orders and messaging applications — to determine whether a binding agreement exists.

A recent example is Jaevee Homes Ltd v Fincham [2025], where the Court found that a binding agreement had been created through WhatsApp messages discussing demolition works and payment terms, despite no formal contract ever being signed.

The case serves as an important reminder that informal communications can carry significant legal and commercial consequences.

Why This Becomes a Litigation Issue

Informal arrangements often operate smoothly while commercial relationships remain positive.

Problems usually arise when:

• payments are delayed;
• project scopes change;
• works are varied informally;
• supply arrangements deteriorate; or
• business relationships break down.

When disputes arise, parties can have very different understandings of what was agreed, who was responsible for what, and when payment was due.

From a commercial litigation perspective, we regularly see disputes involving:

• unpaid invoices and debt recovery;
• disputed verbal agreements;
• unclear payment obligations;
• contested variations to works or services;
• supplier and contractor disputes; and
• shareholder and business partner disputes arising from informal arrangements.

In many of these matters, the outcome turns on one critical question:

What can actually be proven?

The Commercial Risk for Businesses

Where agreements are poorly documented, disputes can quickly become expensive.

Businesses may face:

• prolonged litigation;
• difficulties recovering unpaid amounts;
• evidentiary disputes over key contractual terms;
• project delays; and
• significant legal costs that could otherwise have been avoided.

Even where a business ultimately succeeds, unclear or informal arrangements often make disputes more complex, time-consuming and commercially disruptive.

The Good News: Much of This Risk Is Preventable

Businesses do not necessarily need lengthy contracts for every transaction.

However, they do need clarity.

Simple steps can significantly reduce litigation risk:

• confirm key commercial terms in writing;
• document any variations to scope, timing or pricing;
• avoid vague “we’ll sort it out later” arrangements; and
• seek legal advice early if disputes or payment issues begin to emerge.

The Takeaway

Strong commercial relationships are built on trust.

However, when disputes reach the courtroom, Courts do not determine cases based on assumptions, informal understandings or handshake deals.

They determine them based on evidence.

If this article raises any questions about your business arrangements, contractual disputes or litigation risk, our Litigation Team would be pleased to assist.