Get It in Writing: A Quick Guide to Agreements and Contracts

Thursday Bram — Fri, 17 May 2013 09:48:59 +0000

Everybody's heard that worn-out piece of wisdom — get any deal you make in writing because something could always go south with the deal. We hear it regularly, but not all of us do it. It's a bit of a hassle, especially for small agreements. It doesn't make sense to require a contract if you're paying a neighborhood kid a little cash to mow your yard, after all. And if you're not writing out that agreement, why write out something that's a little bigger? Before you know it, it's easy to justify avoiding contracts entirely. (See also: 16 Things Your Lawyer Won't Tell You)

But it's time to refresh the saying and start following it a little more closely. It is important to get things in writing — and it's even more important to know what that writing means.

You Need It in Writing, Even When You Think You Don't

Technically, a verbal contract is supposed to hold up just fine in court. But the reality is that you can get into a situation where each side of the argument remembers the contract in a different way. Neither side may be lying in such a case. If the deal was not incredibly specific, each party may remember his interpretation of the deal, rather than the actual words used when the deal was struck.

Writing down the terms of an agreement does more than make legal situations easier to sort out. The act of writing encourages you to be as specific as possible. As you're writing, you may even find some details that really ought to be hashed out before you finish setting up the agreement.

Ask for Help

I'm not a lawyer. You should consult a lawyer any time you're not sure about signing a contract or an agreement, as well as get help when constructing your own contracts. There's a question of practicality in play, of course. You're probably not going to worry about legal counsel unless there's enough at stake to make it worth the cost of consulting a lawyer.

But any time you feel out of your depth, you should make a point of asking for help.

The Difference Between Contracts and Agreements

When we think of contracts, our minds often go straight to documents written with tons of legal jargon. In reality, a contract can be written plainly. A contract just has to be a legally-binding agreement that meets certain requirements, such as showing a benefit to be received by each side of the agreement. Many agreements are legally binding, even when they aren't contracts, but not all are.

Since we can't all go to law school, it's best to plan to jot down the key terms of any agreement you come across, and don't worry about whether it's a contract or not.

You also want to make a point of reading any agreements presented to you before you sign them. As much as no one ever wants to do so, this even includes reading the fine print presented to you when you sign up as a member of a website.

Understanding Legal Capacity

One of the key issues that goes along with making a valid contract (or even an agreement) is that the people involved have to have legal capacity — the ability to understand what they're doing when they sign a contract. Someone who is intoxicated or mentally ill, for instance, cannot agree to a contract.

There are specialized laws to deal with minors. Someone who is a legal minor can make a contract, but he can also "disaffirm" a contract, essentially backing out of it. In such cases, the minor is required to return anything he gained through the contract. There's a legal quirk where trades or barter (including when a retail item is purchased for cash) are not considered contracts.

Dealing With Boilerplate

Quite a bit of a contract may be standardized, but what is considered boilerplate (the text of a contract that can be used over and over again for similar situations) can differ between types of contracts, industries, and other factors. It's worth studying up on the clauses you're likely to see often, but don't be surprised any time you see a new one. These are a few of the more common provisions you may see:

Waiver of Jury Trial

Many contracts will include a clause requiring that, in the event of a problem, the parties go through arbitration, rather than take the matter to a jury trial.

Notice Provisions

In the event of changes or termination of the contract, each party needs to be notified. That requirement is written out as a notice provision.

Governing Law Clause

Because laws can differ by state, most contracts include a clause specifying which state or country's law the contract will be enforced under.

Force Majeure Clause

Things happen that are outside of the control of any one party, ranging from wars to hurricanes. Therefore, many contracts include a clause that lays out what should happen in the event that one party can't carry through on the contract due to one of these causes.

There are plenty of clauses and provisions that show up on a regular basis in different types of contracts. It's worth investing time in learning about the specifics of the types of contracts you'll likely deal with. The same goes for the laws that help define how we handle contracts and other agreements. At minimum, learn about how broken contracts are handled in the courts of the state you live or work in.

Have you ever been surprised by a clause in a contract or agreement? Have you ever wished you'd "gotten it in writing?"