A 4-page document titled "Service Agreement" sits in a folder on the desk of a sole proprietor who operates a consulting practice in southwestern Ontario. The document outlines terms for a 12-month engagement with a regional manufacturing company that produces custom metal components for the automotive sector. The consulting practice would provide operational efficiency assessments and implementation support at a rate of $8,500 per month, with the arrangement set to begin on the 1st of the following month. Both parties discussed the terms over 3 meetings spanning 6 weeks, and the manufacturing company's operations manager sent an email stating the company was "ready to proceed" and asking when the consultant could start. The consultant began preparing for the engagement, declining 2 other potential clients and purchasing $3,200 worth of specialized software to support the work.
The document was never signed by either party. The manufacturing company's owner, who had not been present at the meetings, learned of the proposed arrangement and instructed the operations manager to halt the process. The operations manager sent a brief email indicating the company had "decided to go in a different direction" and would not be moving forward. By that point, the consultant had already blocked out the 12-month period in the practice's scheduling system and had begun preliminary research on the manufacturer's production processes using publicly available information.
The consultant believes a binding contract exists based on the email communications and the clear terms that were discussed and documented. The manufacturing company maintains that no contract was formed because the written agreement was never executed and the operations manager lacked authority to bind the company. The consultant points to the $3,200 expenditure and the lost client opportunities as evidence of reliance on what was understood to be a concluded deal. The manufacturing company responds that preliminary discussions and preparation do not transform negotiations into enforceable obligations.
The parties now face a fundamental disagreement about whether their exchanges constituted an offer and acceptance that created binding obligations, whether the consideration element was satisfied before the arrangement was repudiated, and whether the unsigned document and email correspondence together or separately evidence a contract. The consultant must determine what legal recourse, if any, is available, while the manufacturing company must assess its exposure for what it views as a negotiation that simply did not conclude.