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So you are working on a project to build a SaaS (Software as a Service). You prepare a technical contract and have it reviewed by intellectual property lawyers and it passes their approval. You present the contract to the client and they refuse to agree to the terms of the contract. But they still want to move forward with the project. They give you the agreed upon deposit and you begin work. Several months into the project, the relationship with the client goes sour and you refuse to continue to work on the project.

Can the client hold you to the contract which was not signed by either party?

Can they use the non-signed contract and copy of the deposit check as evidence in court as a verbal contract?

If they sue to try to recover the deposit, do they have any legal standing?

  • yes, yes, and yes – ihtkwot Jun 8 '15 at 18:57
  • no (no evidence the written contract is binding - there is no evidence it was executed - ie no sigs, and no meeting of minds on it). No - copy of deposit check shows there was a contract of some sorts, but not what the terms were. Yes, they have legal standing - ie they can bring a case, because they can evidence a relatiobship and dispute. That does not mean they will win, particularly if work has been done. – davidgo Dec 15 '16 at 9:45
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This is largely a contract law issue, with little to do with intellectual property.

Let's take a closer look at Offer and Acceptance of a Contract. An Offer or Acceptance can be made:

  1. Orally
  2. In writing
  3. By conduct

First, you offer your client a written contract, with terms and conditions. Your client refused to accept. There is no contract.


Then, your client offers you another contract, orally:

We still want you to move forward with the project. We will give you $X as deposit, and then you will begin work. After the project is completed, we will deposit another $Y to you.

It is irrelevant whether $X and $Y are the same as in the written contract or not. This is a separate contract, and the original terms you proposed does not apply.

Did you accept this contract? From Felhouse v. Bindley (1862):

Acceptance must be communicated clearly and cannot be imposed due to silence of one of the parties.

Since you accepted the deposit and began work, you have accepted the contract by conduct. This is a contract where there is no terms and conditions besides that one sentence mentioned by your client.

Furthermore, you intent to carry on this contract (you wish to complete the project and get the money). This contract has benefits to you for Consideration.


Would it have made a difference? Suppose that your client's response is:

We are sorry, our company has a weird policy about accepting contracts in writing, 30 people have to approve it and it takes 3 months. Would you take a verbal acceptance? We will give you $X as deposit and you will begin work, after work is finished we will give you $Y, as stated in the contract.

Then this would be an oral acceptance of the original (written) contract with terms and conditions. But that cannot happen, since the client explicitly refused your offer. An acceptance must be unconditional. Qualification of terms of offer means to destroy the original offer. Counter-offer means to reject the original offer.


Can the client use the deposit as evidence that there is a verbal contract?

Yes, certainly. But this contract is not the un-signed contract. Read this conversation, again, carefully:

We still want you to move forward with the project. We will give you $X as deposit, and then you will begin work. After the project is completed, we will deposit another $Y to you.

There is no mention that your proposed terms and conditions apply, is there?

Even if the client, after 2 weeks, come back to you and says:

Sorry for refusing your offer earlier. After due consideration, we think your company's proposal is best. We would like to move forward with you. It will be $X for the deposit, and $Y after completion. All your proposed terms and conditions apply. Deal?

This time your client is making an Offer. If you accept, it will be a new contract, not the same one you offered to the client earlier.


About the money. This is really a case by case situation. Depending on how much the entire project is completed and the nature of the project, results can be different.

A deposit is necessary to begin work. The deposit secures the client's intention to carry on the project. The final payment is make after work is finished satisfactorily.

Isn't the current situation exactly what a deposit is for?

  • 1
    The exact terms of the verbal contract are not known, but it is reasonable to claim that the deposit was payment for starting the work (with the intent that an agreeable contract would be worked out, and then the project could be finished in the original timescale, but with no obligation on either side for full delivery of the project or the money yet) – gnasher729 Oct 11 '15 at 1:30

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