In my legal practice representing small businesses and individuals, I get a lot of questions. Every week, I’m going to post one of the more common questions and provide some context. Of course, everyone’s situation is different, there is NO one size fits all answer, so you should be sure to review your specific situation with your legal counsel.
One of the most frequently asked questions is whether or not the potential client has an enforceable contract with someone else, whether for the purchase of a car, or for home improvement services, or a thousand other possible scenarios.
While it seems fundamental, the law of contracts is one of the most written about and dissected areas of the law. A new law student gets introduced to this reality in their first year of law school, and also introduced to multivolume works like Corbin on Contracts, which is a fifteen volume (15!!!) scholarly study of contract law. The sheer weight of the entire series is enough to make your bookshelves sag, as it spans thousands of pages exploring almost every imaginable aspect of the evolution of contract law. Needless to say, there are many subtleties.
All of that aside, there is one self-evident way you can protect yourself when making deals is this: make sure that you exchange your deal points in writing. This sounds so elementary that it doesn’t need to be said but both beginners and experienced businesspeople alike run into trouble with this issue.
Often, people try to rely on verbal arrangements to prove the existence of a contract with varying degrees of success (and failure). In the end, the best evidence of an enforceable contract is a written exchange between the parties containing all the basic elements of a contract.
The basic elements of a contract you ask? Here they are:
Offer – an offer from one party to another for the sale of a good or service.
Acceptance – agreement by the recipient to the terms of offer.
Consideration – the price being paid for that good or service.
The price must be stated in the writings. If no price is defined, you have no contract. Period.
In this day and age, it is increasingly less common that the parties take the time and expense to set out a formal written contract which is fully executed by both parties. Often times, there is an exchange of emails, iMessages or text messages, or sometimes voice mail messages. (NOTE: never try to form a contract by voice mail!) Contracts can be formed in this way, but often relying on email exchanges presents a totally different set of concerns we’ll address another time.
A quick call to your attorney at the beginning of a commercial deal (or using a purchase order form or invoice form available through a number of off the shelf packages) can avoid a lot of headaches and stress later on.
Moral of the story: A clearly written and signed agreement protects all parties in the deal.
Bryan Tuk is the owner of the Tuk Law Offices based in Allentown. Bryan’s practice is focused on small businesses, nonprofit organizations and arts organizations. You can reach Bryan by email at firstname.lastname@example.org, or follow Bryan on Twitter and FaceBook @TukLawOffices.