Most people believe they know a contract when they see one. That’s probably true in most cases. However, it’s important to know what the law says a contract is: an agreement between two or more parties involving the exchange of goods or services.
Beyond this basic definition, there are a number of myths and misconceptions involving contracts.
Myth No. 1: Contracts are Difficult, if not Impossible, to Understand.
It’s true that poorly drafted and ambiguous contracts filled with unnecessary “legalese” are difficult to understand, even for seasoned attorneys. However, this kind of contract is the opposite of what a contract should be; if you need an attorney to understand a contract, it’s useless to the contracting parties.
Good contracts are written in plain language and are simple, accessible and easy to understand. They function as a clear guide to the parties’ deal, without the need for intervention and interpretation by attorneys.
Myth No. 2: Contracts Use Certain Standard Terms.
Everyone has heard it: “this contract is standard” or “this is just standard language”. While most lawyers have their own contract “forms”, and there are literally thousands of contract “templates” of the same kind of contract found on the internet, there is no such thing as a “standard” contract, nor are there “standard” contract terms. In addition to being just plain wrong, this myth inevitably leads to a similarly wrong myth that “standard” contracts are also fair to the contracting parties.
All contracts need to be customized to the parties and their agreed upon arrangement. And while contracts use language that may typically appear in many contracts, the best contracts are those that take the parties business arrangement and craft language that applies the law to the facts of that arrangement.
Myth No. 3: Contracts Must Be in Writing to be Enforceable.
A corollary to this myth is that, “if you signed a contract, you can’t challenge it”. A related corollary is that “I never signed the contract, so it’s invalid”.
The law does require some contracts to be in writing to be enforceable such as contacts that can’t be performed in one-year, real estate contracts and contracts for a debt. Except for these contracts, covered by the so-called Statute of Frauds, though, oral contracts are permissible and enforceable even though they’re harder to prove and therefore enforce.
Similarly, “implied-in- fact” contracts are enforceable by showing the parties’ intention to create a contract through their conduct, even in the absence of a writing. Conduct is proven through testimony of the parties and supporting documentation like emails, texts and other writings. So, just because there’s no “formal” contract signed by the parties, it doesn’t mean that a contract wasn’t formed.
Myth No. 4: The Parties to a Contract are Bound to its Terms as Written.
This is true generally, but those contract terms that violate applicable law will not be enforced no matter what they state. Examples include:
- Terms that are impossible to perform, or that would cause a party to go to extreme hardship or expense to perform.
- Terms that are against public policy (i.e., that would cause harm to society if performed).
- Terms that restrict a party from working, such as a restrictive covenant in an employment agreement that prevents an employee from working anywhere in the United States upon termination of employment.
Consult An Attorney for Guidance
Plain language documents not only save your business time and money, but they also put processes into place that ensure you get paid on time, your ideas and work product are protected, and the relationships with your business partners are established and maintained. At Becker Law LLC, we will negotiate, draft, and review your contract documents, including asset purchase agreements, commercial leases, non-disclosure or non-competition agreements, consulting or outsourcing agreements, strategic partnership agreements, and more. If you want to discuss your new or existing business venture and your legal rights and options, and you’d like to understand how our “frictionless customer service” can work for you, contact Becker Law LLC or use our online scheduler to arrange an on-demand consultation.