How verbal agreements lead to #ContractDrama

Various disaster scenarios YOU should avoid when it comes to contracts. (Why yes, I can help you avoid them.)

You do not want to be saying or thinking these things when it comes to your deals:

“Wait…we were just talking…does THAT count as a contract?”
Or, “whoa…but, that’s not actually IN the contract”… (so, why am I doing it anyway?)
Or, “wait, what? I didn’t mean that when I said that..”
Or, “unfortunate circumstances have led to this terrible sad breach and um.. now what do we do?”
And, finally…. “wait…shoot…did that email/text message count as a contract?!?”

Here’s a shocker…Contract disputes happen a lot.

They happen when one party didn’t realize an enforceable contract existed! (It happens!!)

They happen when the parties veer off the path of clear-cut terms stated in the contract and into the wild west of mayhem and misery because of.… [INSERT any number of reasons, such as, people pleasing, frustration, incompetence, or thinking the problem will go away on its own.]

And, #contractprobs certainly happen when…the contract itself SUCKS. (Ahem…I’m looking at YOU LegalZoom.)

And… evolving technology adds to the confusion. Contract disputes may arise when the boundaries of the contract get blurred…

So, what is a contract? A contract is a legally binding agreement between two or more parties to do something. Ok, thanks Ohio Revised Code. Once again, THE LAW is not very meaningful and definitions like this are WHY you must pay a lawyer!

I bet you want to know what makes a contract legally binding. I.GOT.YOU.

To be a legally binding “valid and enforceable” contract there are three essential elements:

Offer
Acceptance
Consideration

Generally speaking, if these three elements exist, the contract is likely valid and enforceable.

What’s an Offer?

An offer is a written or spoken statement by one individual to another and is an expression of an intention to be bound by the terms offered. Although it appears very straightforward, disputes arise between parties as to the existence of an actual offer. One party may believe they made an offer, whereas the other party believes it was just a discussion. A statement is more likely to be considered an offer if it is specific with definite terms and conditions.

What counts as Acceptance?!

The recipient of an offer must accept the offer while the offer is still open. Changing up the terms makes a counteroffer and a counteroffer is not acceptance of the original offer. However, if the original offerer accepts the terms of the counteroffer, that creates a valid contract. Makes sense, right!

Consideration… is what, now?

Consideration is the third element of a valid contract. Consideration is a legal concept describing something of value exchanged for something else of value. The presence of consideration distinguishes an offer from a gift. The exchange of something of value for another thing of value fulfills the consideration requirement. So, money for services, money for goods, services for services, goods for goods.

Consideration does not have to be equal, or of substantial value; a nominal amount of consideration will still count towards creating a valid enforceable contract.

IS A VERBAL AGREEMENT BINDING?

In Ohio certain contracts must be in writing, i.e., property transactions, goods transactions with a value of over $500, contracts with a completion date longer than 12 months.

However, verbal contracts that pertain to other types of transactions can be legally binding if they contain all the necessary elements of a contract. Watch out…. it’s usually a big mess.

Can an email result in a contract?

Yep… today the majority of communications are online. And, yes! Ohio Law provides that electronic communications can result in contracts. Therefore, an email is sufficient to form a contract as long as the required elements of a contract are met, offer, acceptance and consideration.

Simply signing an email with your name is often sufficient. You may avoid inadvertent contracts via email by stating that your negotiations are subject to contract and that you do not intend the communication to be binding.

Are text messages legally binding?

Yes, a contract can arise through any electronic medium, not just email communications. If the text message chain includes necessary contractual language, the text messages are legally binding.

It is important to avoid inadvertent text message contracts that may become legally binding, including the language “subject to contract” may clarify your intent. Afterall, you do not want people relying upon communications that you do not intend to be binding.

Finally, it is best to have an experienced business law attorney answer your questions and evaluate the facts of your particular contract dispute. Contact Wick Law to discuss the facts of your particular situation.

Wick Law, LLC is a small business legal practice, representing owners, investors, and entrepreneurs in all aspects of commercial, corporate, and business law, estate planning, contracts and negotiations, business litigation, and real estate. For more information: Contact 614-572-6366, visit www.mwicklaw.com, or email us at mwick@mwicklaw.com. Wick Law, LLC is located in Columbus, Ohio.

(Materials in this article have been prepared by Wick Law, LLC for general informational purposes only. This list is for educational purposes and is not to be considered exhaustive. More items could be added to this checklist based upon the type of transaction or industry standards. These materials do not, and are not intended to, constitute legal advice. The information provided is not privileged and does not create an attorney-client relationship with Wick Law, LLC or any of the firm’s lawyers. This checklist is not an offer to represent you. You should not act, or refrain from acting, based upon any information in this checklist. Wick Law, LLC maintains offices in Columbus, Ohio, and has lawyers licensed to practice in Ohio and in the United States District Court, Southern District of Ohio. The firm does not intend to practice law in any jurisdiction where the firm is not licensed.)