11
Jul
11

Contracts 101

Does it have to be in writing?

Not necessarily!  For the vast majority of exchanged promises (which is what contracts really are), a handshake is good enough.  However, there are some exceptions that require a written contract.  These exceptions come up when someone is trying to defend against enforcement of a contract and they claim that the “Statute of Frauds” requires that the party that is supposed to be bound by the contract had to sign a written contract.  These agreements include:

  • promises to pay the debt of another
  • promises in consideration of marriage (no, you don’t have to write it down on bended knee–but if you are promising something in exchange for that “I do” then it needs to be in writing)
  • land agreements, including leases and easements for more than a year and mortgages
  • any promise that, by its own terms, cannot be performed within one year (this one can get tricky)
  • sale of goods valued at $500 or more (again, there are some exceptions, like specially manufactured goods)

Even if there should have been a writing and there wasn’t, there are other ways that someone can seek a remedy, such as what is called “unjust enrichment” or getting the reasonable value for the goods or services that should have been provided.

More often than not, I see clients that didn’t put it in writing because they were afraid they would offend the other party.  Believe me, they will be much more offended when you have to sue them because something wasn’t made clear in a contract.

Remember: the purpose of contracts is to provide clarity and to allocate risk BEFORE any troubles begin.  They don’t insure that there won’t be a lawsuit, but they may narrow the issues when litigation becomes inevitable.

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