They’re also everywhere, such as the terms and conditions you probably blindly agree to all the time. When it comes to contracts, you have rights you may not have known you had. You can also sign away your rights.
Whether you’re being faced with a contract you’re not sure about or just want to learn something new, here are five things you probably didn’t know about contracts:
It may surprise you, but you don’t have to agree to all of the terms of a contract, even if it’s from a big company. Of course, says Lawyers.com, all parties to the contract have to agree to your changes to make them official. It’s important to change the actual contract with the other party’s consent rather than rely on a written or verbal agreement outside the contract. Otherwise, you could face penalties for breaking the agreement.
Making small changes to a contract is easy. Just handwrite your own changes into the contract and sign your initials next to each change. Then, sign the entire document. If the other party agrees with your changes, they can then sign their initials next to each change and sign the whole document.
Making major changes to a contract takes more work. Lawyers.com says you’ll first want to negotiate the changes with the other parties. Then have whoever drafted the first contract print a modified version with the changes. All parties should review the new document, making sure the correct changes were made, and sign it. As a practical tip, it is best to run a redline or comparison of the modified contract against the first contract to ensure that any other changes not previously agreed to have not made their way into the modified contract.
It may surprise you, but you can even change the terms of a contract after signing it. However, this typically happens if all involved parties agree to the changes. Usually, consent to change an already signed contract must be expressed in a separate written, signed document or amendment. Additionally, it is important to look to the terms of the original signed contract for language on how and when to make enforceable changes to the contract. As a practice tip, this is a very important section for all parties to review before signing in the event that upholding the terms of a contract become inconvenient or even burdensome.
Although less common, there are some instances in which one party can agree to let the other party change the contract at their sole discretion.
If you decide to change a contract you’ve already signed, Lawyers.com says to add an additional section (a rider) to the document that addresses the changes. Each party to the original contract should sign the rider.
If you like the terms or conditions of the contract but want to add new ones, or if you want to clarify ambiguous terms, you can add an addendum. You don’t typically have to sign this section unless the contract says you have to. Click here for more information on addendums.
If you need help understanding a contract or negotiating one, you can find a lawyer through Lawmato’s app or website.
You may be surprised to learn that there are a wide variety of situations in which a contract wouldn’t be enforceable:
The contract is impossible to carry out
To prove in court that a contract is impossible to carry out, according to Nolo, you’d need to show that:
Newcomer and Soldo write that successfully arguing the “Doctrine of Impossibility” will allow the party to excuse their performance of the contract. Generally, this principle applies in situations in which an applicable law has changed, death of a person whose performance was essential to the contract, or destruction/modification of an object under the contract. Keep in mind that this defense will not save a party who assumed the risk of the unexpected event. And if the event was reasonably foreseeable to the party such that they would have been expected to account for its occurrence as part of the contract, then the defense fails.
Note: Although extremely similar, the Impossibility should not be confused with the defense of Impracticability, which arises not when a party is wholly unable to carry out their contract obligations, but instead when performing such obligations has become extremely and unreasonably difficult or expensive or performance would lead to injury or loss to any of the involved parties.
Something about the contract is shockingly unfair
A court that finds a contract unconscionable may void the contract. A court may deem a contract unconscionable when its terms obviously favor one side, often to the detriment of the other side. A tell-tale sign of unconscionability is when a party with considerably more power chooses to wield it unreasonable over a desperate person or take advantage of a naïve person. Alternatively, the court may enforce conscionable parts of the contract and rewrite others.
The contract goes against public policy
For example, a contract that would break the law if it were enforced, like an illegal drug deal.
One or both parties made a mistake related to the contract
One or all parties to a contract might make a serious mistake. If it relates to the contract in an important way and has a significant effect on the exchange or bargaining process, the contract can be found unenforceable.
A clear distinction here must be made between unilateral mistakes and mutual mistakes, as the type of mistake made can greatly affect which side is more likely to win in court. The Cueto Law Group explains that a unilateral mistake occurs when only one party misunderstands a crucial fact, and by contrast, a mutual mistake happens when both parties have committed an error. In most cases, if the court determines that a mutual mistake was made, it will void the contract and discharge the duties of all parties as to all obligations. But, if the court believes a unilateral mistake has occurred, then the mistaken party must also show that the non-mistaken party knew that the mistaken party made an error and took advantage of this, often by not informing the other side of their mistake. Otherwise, if the mistaken party cannot show that the non-mistaken party acted dishonestly, then they will stay on the hook for contract performance.
Fraud or misrepresentation occurred during negotiation
If a party says something false, lies by omission, conceals or misrepresents something important during negotiations with the other party, a court may find their contract unenforceable.
A party didn’t disclose an important fact about the deal
Nolo defines nondisclosure as “misrepresentation through silence.” The parties to a contract have to disclose all material facts about what they’re proposing, regardless if one side went out of their way to ask the other side. Such disclosure is considered standard and must be made upfront, but only as to material facts, which are facts that if omitted or misrepresented would fundamentally change the character of the contract. Another way to think of materiality is to consider those facts upon which a case/contract hinges on or might sway the outcome.
Additionally, if one party asks the other about any fact of the contract, the other party has to tell them the truth. When one party suffers financial loss as a result of fraudulent nondisclosure, they can file a lawsuit against the other party.
One party lacked the capacity to understand what they were agreeing to
If a party to a contract is incapacitated, too young or mentally or intellectually disabled to give meaningful consent, the contract can be found enforceable. Examples of incapacitation can include those in a coma or under the influence of alcohol, illicit drugs, or even prescribed medications. Young age is typically defined to be anyone under the age of the majority or legal age, which in the U.S. is 18 years old. Mentally disabled individuals who experience psychotic breaks or hallucinations may not be the best judges of fact or reality at the time of entering a contract, however, even they can experience what the law calls “lucid intervals” during which they are believed to have been capable enough to assess the contract well despite being unable to in the time immediately preceding or thereafter.
A party was coerced into agreeing with a contract
Nolo shares the following example:
“In an often cited case involving duress, a shipper (Company A) agreed to transport a certain amount of Company B’s materials, which would be used in a major development project. After Company B’s project was underway and Company A’s ship was en route with the materials, Company A refused to complete the trip unless Company B agreed to pay a higher price. Company B was forced to pay the jacked-up rate because there was no other way to get the material, and not completing the job would lead to unsustainable losses. The court ultimately found that this agreement to raise the price was not enforceable, because it came about through duress.”
One party used undue influence over another
Here is Nolo’s explanation of this situation:
“In general, to prove undue influence, Person A would have to show that Person B used excessive pressure against Person A during the bargaining process, and that for whatever reason Person A was overly susceptible to the pressure tactics — or that Person B exploited a confidential relationship to exert pressure on Person A.
Nobody enjoys reading a long, boring contract. But if you don’t the fine print, you could unknowingly sign away your right to a trial by jury.
Arbitration agreements make it so that parties resolve legal disputes in private arbitration instead of court, says Classaction.com. Instead of there being a jury, a third-party arbitrator or tribunal makes decisions for the parties. This is supposed to help disputes be solved more quickly, but often one party will preemptively decide who the mediator will be or where the arbitration will take place by including an arbitration clause, tipping the scales in their favor should a disagreement crop up between parties. The outcome of an arbitration can be binding on all parties, and the winning party can take the decision to court to affirm its enforcement over the losing party.
Beware that you can be bound by an arbitration clause even if you didn’t sign a contract or verbally consent to it. Mother Jones reported that Fonza Luke never signed an arbitration agreement presented to her by her employer. Later on, she wasn’t allowed to file a workplace discrimination lawsuit. Her employer argued that by showing up to work, she agreed to the arbitration clause.
https://www.hg.org/legal-articles/at-what-point-does-an-email-become-a-binding-contract-46423
When most people think of contracts, they think about paper or electronic documents that the participating parties sign. What they don’t realize is that other forms of communication can function as legally binding contracts.
Even a verbal agreement, including one conducted over a phone call, can count as a legally binding contract. In fact, most verbal contracts are legally binding, according to LegalKnowledgeBase.com. In their words, proof of a verbal contract may include the following:
There are other ways to form a contract that you might not expect. Courts in multiple jurisdictions have determined that a series of emails or letters sent between two parties can constitute a legally binding contract as this demonstrates that there is a mutual, clear understanding between the parties, says HG.org. To protect yourself, they say you should word your emails carefully, making it clear that you don’t intend to create a contract “except pursuant to a later written agreement.” At the beginning of each email, you can type, “For discussion purposes only.” Click here for more tips from HG.org on making it clear that an email isn’t a contract.
According to Juro, even a text message or direct message on social media can count as a legally binding contract. You don’t necessarily need to worry that you’ve accidentally formed a contract either way, as a contract needs to meet certain criteria to be legally binding. According to Juro, such factors include:
Even a message written on a napkin can count as a legally binding contract; in fact, the Virginia Supreme Court ruled this so in Lucy v. Zehmer.
Juro gives the example of the following text message conversation:
Robert: Will you come round next week and help me put together some flat-packed furniture?
Anna: Only if you buy me dinner at that new place on the high street.
Robert: Yes, of course. I’ll even throw in dessert.
Robert saying, “Yes, of course,” indicates his agreement to the contract.
To avoid accidentally creating a contract, Juro recommends making it clear that to require a formal document at a later date to be the contract.
An exchange of messages doesn’t need a signature to be a legally binding contract. In fact, even making a mere mark on paper that is characteristic of that party may count, like an insignia or stamp.
From Section 4 above, it follows that you don’t need a lawyer to make an enforceable contract. Moran Law Group provides a handy guide to writing a contract without a lawyer.
To be enforceable, a contract needs to establish that one party made a promise to another in exchange for something of value, like money. Moran Law Group gives the example of someone agreeing to pay someone a fee to have them speak at an event. If either party breaks its promise, a court can help the injured party get compensated or “be made whole” by specific performance.
If you’re going to write a contract without a lawyer, make it spell out the terms so completely that nothing is left out and there’s no ambiguity. A judge should be able to understand exactly what was promised by reading the contract. You and the other party will probably make some assumptions that you expect each other to understand; figure out what they are and write them into the contract. It is best to have in writing even the unstated understandings between you.
The larger or more significant the things of value exchanged in the contract are, the more important it is to include “what ifs” in the contract. Things might not go as you and other parties hoped they would.
Moran Law Group offers this advice on providing for attorney’s fees:
If you expect to enforce the contract in court if it’s breached, then your contract should provide that the injured party can collect its attorneys fees from the other in addition to any other damages.
Why?
Because the default American Rule about attorneys fees is that each party pays their own attorney, win or lose. That is, unless the contract, or a statute, says differently.
Without a provision that grants the prevailing party the attorneys fees necessary to enforce the contract, it may simply be too expensive to go to court. Or, the cost of representation may consume the damage award.
