50 Shades of Contract

The “50 Shades of Grey” movie is a good reminder that we’re sometimes faced with the need to negotiate a quick and dirty contract without a lawyer.

Although the movie’s characters, Christian and Anastasia, probably couldn’t get a judge to enforce the unusual agreement proposed, a simple contract can handcuff the respective parties. While lengthy documents wrapped in jargon are the norm, a contract really relies on basic components.

Before we go further, this author insists on a hard limit: with entire tomes on contract law, this article is meant to provide BASIC information to consider in a pinch when drafting or reviewing an agreement (including the use of internet “forms”).  Even if a contract has the required elements, it may not be enforceable for other reasons. Professional help is a MUST when possible (particularly with out of state parties). Even the simplest contract can lead to litigation.

Texas law essentially says a contract exists if there is: an offer; acceptance of that offer; mutual consent to the terms of the contract confirmed by communication; delivery of a contract; and consideration (bargained for exchange of promises, payment, etc.). A break in the chain of these elements can lead to an unenforceable deal, but most of these items will be in place once there is a contract for signature, particularly if the elements are proved through the document.

Before entering an agreement for whatever is being exchanged – goods, property, cash and yes, even services – ensure all parties actually agree about what will take place.   If you’re drafting or negotiating an agreement, email is perhaps best to exchange ideas as it easily demonstrates offer development, proposed changes, and whether acceptance of the offer and consent to the terms were communicated. Of course, it also proves contract delivery.

If preparing an agreement, provide a detailed description of the contract purpose or make sure the agreement you’re reviewing contains it. This should be drafted so that someone unfamiliar with the deal can easily understand what the parties want to achieve. Also consider defining unfamiliar or industry specific terms.

Make sure the document explains what’s exchanged, including how and when payment – if any – is due. Since real-world contracts are more about partnership than dominance, the document should outline and explain each party’s role and duties required to earn the exchange of a payment, service, or other item. Aggressively unfair rules can actually void some contracts.

Ensure the contract has “safe words” to exit the arrangement if things don’t work out in the form of a termination clause; a contract without one generally can’t be ended for convenience. On that note, if the contract is intended to have a time limit, then the length of the contract should be specified.  Avoid “automatic renewal” language and simply provide how the contract may be terminated early if this is something the parties agree upon.

The contract should detail what happens if the parties don’t adhere to the terms. There must be enforcement options to whip the other party into shape, but think through the options: would a failure to do something mean the contract should terminate immediately? Should a party be permitted time to correct some problems? Consider consequences for things like late payments or not paying at all, but be careful to review restrictions on interest and penalties in contracts.

Think about whether special laws apply and explain who is responsible for them. For example, if you hire a caterer serving liquor at your party, consider making them responsible for service of alcohol rules and punishment. Also pay attention to what state’s law will apply, how disputes will be resolved, and who pays for the dispute if one arises.

Finally, as obvious as this seems, the parties should sign, date, and then exchange copies of the executed contract. Electronic signatures are usually fine, but old fashioned ink is hard to beat.

Whether drafting or reviewing a deal, remember that ambiguity is the biggest source of disagreement.  Having thorough conversations and carefully explaining key terms in a written contract could help avoid being slapped with a lawsuit later.

And in case you were still wondering, signed or not, Christian’s contract isn’t enforceable…

If you need legal advice, schedule a meeting with Tiwari + Bell PLLC through our website or by calling (210) 417-4167.