Contracts

By Jonathan E. Shimberg and Linda R. Crohn

How many times have you been frustrated by things that didn't work out the way you thought they would? Like the apartment you leased, the car you bought, the job you just took, or the partner in a band who promised to share expenses with you. You probably said to yourself each time, "But I thought we had a deal;" "We shook on it;" "I know it was in writing, but the salesman told me....;" "The ad in the paper said...;" and so on. Each one of these situations involves one or more principles of contract law. Once you know some of the basic rules, you'll be in a much better position to do the right thing when you enter into an agreement.

WHAT IS A CONTRACT

In its simplest terms, a contract is an exchange of promises that is legally enforceable. For instance, "I promise to pay you $1000.00 and you promise to sell me a custom-made guitar." This exchange of promises is called an offer and an acceptance, which are two of the three elements in every contract. The third element in all contracts is an exchange of consideration. Consideration can be a broad variety of things.......It's usually money, but it can also be the performance of services ("work"), providing something of value (selling or trading something), or even the promise not to do something (such as promising not to sue when settling an outstanding or disputed debt).

PUT IT IN WRITING

The biggest problem with contracts happens when the people who have the agreement disagree about the exact wording or meaning of the offer and acceptance ("terms") in the agreement they have made. Obviously, the best way to avoid such problems is to put it in writing whenever you can. In many situations, as explained below, there are many types of contracts (or agreements) that must be in writing to be legally enforceable.

Don't try to "play lawyer" when you write out a contract or agreement with someone else. There are no set forms or "legal words" you have to use. Just write out your agreement in your own words... the simpler the better. Here are some of the things you should put in every agreement: A clear statement as to what each party to the contract is promising to do;

• What the consideration will be;
• The date of the agreement; and
• The length of time or term when all of the promises made in the contract are to be completed or performed.

Always include a place for all parties to sign the contract at the bottom of it...and that's basically all there is to it. Naturally, you want to avoid making contracts that include illegal activities, because these are not legally enforceable. Also, be sure the person with whom you are contracting is old enough (18 in Illinois) or is a person authorized to make the contract (e.g. the President of a company is generously authorized to sign contracts, but the janitor wouldn't be).

MAKING IT WORK

Once you have a contract in writing, here are a couple of suggestions to make it work for you. Often times, people who sign an agreement want to change some of the terms, and they do this verbally on the telephone or in person. Problems can result when one or the other has a "different memory" later on as to what was agreed upon verbally. Consequently, it is best to put any changes in writing and attach them to copies of the original signed agreement. Also, if there are going to be any changes on the original contract itself, make sure all parties to the agreement initial and date all of the changes.

ORAL CONTRACTS

With all of this in mind, when are "oral/handshake" contracts enforceable, and when must a contract be in writing? Basically, while it is always desirable to put all deals in writing, here are some basic situations when they must be in writing: Anything having to do with real estate, such as renting, leasing, or buying an apartment, house, or land;|

• Any purchase of non-real property that is $500.00 or more; and
• Any thing that will take more than 1 year to be performed.
• Pre-marital agreements

Oral contracts can be enforceable for purchases of non-real property under $500.00 and for personal service (work/jobs) that will take less than 1 year to perform. A good example of the latter situation is a job offer of "1,000.00 per week" made verbally. It is enforceable because it can be performed in one week, which is less than a year. Clearly, however, it is best to get all employment contracts in writing so that all conditions and benefits applying to the job are detailed for employer and employee to understand.

BREACH OF CONTRACT

Even though you follow all of the preceding steps in making a contract with someone, there may still be problems when one or both parties fail to live up to their promises. That's what the term "breach of contract" is all about. There are many types of remedies that the law provides for contract breaches, but it's best to have a lawyer take over your case at this point if there is substantial money or hardship involved. In most situations you will have made your case much easier for your lawyer if you did the right thing when you did the deal......by following some of the basic rules of contracts.

This pamphlet is for informational purposes only. You should consult with an attorney regarding your specific situation

©1997 SHIMBERG and CROHN

jonshim@aol.com