Contracts are necessary to the stability and success of just about any business, whether they are with certain employees, partners, vendors, customers or clients. In order to make sure they function as anticipated, it is important that they be valid, well-crafted and enforceable. Otherwise, it may not be binding or, even worse, operate to the detriment of your company contrary to how it was intended.
Obviously, it’s best to retain an experienced lawyer to create a customized contract tailored specifically to your business and its needs. Should you decide to take on this responsibility yourself, you should be familiar with the types of contracts that are not enforceable. For instance, did you know that a contract may not need to be in writing to be enforceable?
Handshake and verbal agreements
Non-written agreements can be enforceable in California, as long as there are no statutes that say otherwise. For instance, home improvement contracts between contractors and property owners must be in writing and are required to contain certain provisions (in certain locations of the contract in specified font type and size)! Other types of contracts that must be in writing, according to the Statute of Frauds, generally include:
- Real estate contracts;
- Contracts for goods costing more than a certain amount ($500 in California);
- Contracts that will last for more than a year;
- Agreements to pay off someone else’s debt.
In other cases, a handshake or verbal agreement may be valid, though they will likely come under more scrutiny that written contracts and be much more difficult to enforce should you believe the other party is in violation of any of its material terms.
Getting it in writing — properly
Even if you shake hands or verbally agree to a deal, at the very least you should follow up in writing to summarize the agreement confirming the most elementary terms such as the effective date, the price, date of performance, and expectations to avoid contract disputes and contests.
Whether your contract is oral, oral and supported by a written confirmation, or written, a few basic elements must always exist, such as (1) that both parties have the legal and mental capacity to enter into a contract, (2) protecting against duress or undue influence in entering into the contract, and (3) avoiding mistakes in the agreement.
Considering how much can be at stake, it would be prudent to have an experienced attorney familiar with contract and business laws when you sign, contest or seek to enforce your contract.