At a glance

  • You can rely on this lawful basis if you need to process someone’s personal data:
    • to fulfil your contractual obligations to them; or
    • because they have asked you to do something before entering into a contract (eg provide a quote).
  • The processing must be necessary. If you could reasonably do what they want without processing their personal data, this basis will not apply.
  • You should document your decision to rely on this lawful basis and ensure that you can justify your reasoning.

In brief

What's new?

Very little. The lawful basis for processing necessary for contracts is almost identical to the old condition for processing in paragraph 2 of Schedule 2 of the 1998 Act.

You need to review your existing processing so that you can document where you rely on this basis and inform individuals. But in practice, if you are confident that your existing approach complied with the 1998 Act, you are unlikely to need to change your existing basis for processing.

What does the GDPR say?

Article 6(1)(b) gives you a lawful basis for processing where:

“processing is necessary for the performance of a contract to which the data subject is party or in order to take steps at the request of the data subject prior to entering into a contract”

When is the lawful basis for contracts likely to apply?

You have a lawful basis for processing if:

  • you have a contract with the individual and you need to process their personal data to comply with your obligations under the contract.
  • you haven’t yet got a contract with the individual, but they have asked you to do something as a first step (eg provide a quote) and you need to process their personal data to do what they ask.

It does not apply if you need to process one person’s details but the contract is with someone else. 

It does not apply if you take pre-contractual steps on your own initiative or at the request of a third party.

Example

An individual shopping around for car insurance requests a quotation. The insurer needs to process certain data in order to prepare the quotation, such as the make and age of the car.

Note that, in this context, a contract does not have to be a formal signed document, or even written down, as long as there is an agreement which meets the requirements of contract law. Broadly speaking, this means that the terms have been offered and accepted, you both intend them to be legally binding, and there is an element of exchange (usually an exchange of goods or services for money, but this can be anything of value). However, this is not a full explanation of contract law, and if in doubt you should seek your own legal advice.

When is processing ‘necessary’ for a contract?                                

‘Necessary’ does not mean that the processing must be essential for the purposes of performing a contract or taking relevant pre-contractual steps. However, it must be a targeted and proportionate way of achieving that purpose. This lawful basis does not apply if there are other reasonable and less intrusive ways to meet your contractual obligations or take the steps requested.

The processing must be necessary to deliver your side of the contract with this particular person. If the processing is only necessary to maintain your business model more generally, this lawful basis will not apply and you should consider another lawful basis, such as legitimate interests.

Example

When a data subject makes an online purchase, a controller processes the address of the individual in order to deliver the goods. This is necessary in order to perform the contract.

However, the profiling of an individual’s interests and preferences based on items purchased is not necessary for the performance of the contract and the controller cannot rely on Article 6(1)(b) as the lawful basis for this processing. Even if this type of targeted advertising is a useful part of your customer relationship and is a necessary part of your business model, it is not necessary to perform the contract itself.

This does not mean that processing which is not necessary for the contract is automatically unlawful, but rather that you need to look for a different lawful basis.

What else should we consider?

If the processing is necessary for a contract with the individual, processing is lawful on this basis and you do not need to get separate consent.

If processing of special category data is necessary for the contract, you also need to identify a separate condition for processing this data. Read our guidance on special category data for more information.                              

If the contract is with a child under 18, you need to consider whether they have the necessary competence to enter into a contract. If you have doubts about their competence, you may wish to consider an alternative basis such as legitimate interests, which can help you to demonstrate that the child’s rights and interests are properly considered and protected. Read our guidance on children and the GDPR for more information.

If the processing is not necessary for the contract, you need to consider another lawful basis such as legitimate interests or consent. Note that if you want to rely on consent you will not generally be able to make the processing a condition of the contract. Read our guidance on consent for more information.

If you are processing on the basis of contract, the individual’s right to object and right not to be subject to a decision based solely on automated processing will not apply. However, the individual will have a right to data portability. Read our guidance on individual rights for more information.

Remember to document your decision that processing is necessary for the contract, and include information about your purposes and lawful basis in your privacy notice.