What should you know before you sign a contract? At the least, you should know a few basics about contract law.
In last week’s column, we learned that paying a visit to a doctor can create an enforceable contract, just as if the patient had signed on the dotted line. Here are some other basic principles to keep in mind before you enter into an agreement.
A contract has three basic legal elements, an offer to do or sell something, an acceptance and what is legally called “consideration,” the transfer of something of value in exchange for the services or the goods.
We all enter into various written and oral contracts all the time, whenever we go shopping or buy an airline ticket or pick a gardener to pull the weeds.
When people think of a contract, however, they usually think of a written agreement, with lots of fine print and hard-to-understand legal language. That’s a mistake.
Let’s say you ask a gardener to come to your house once a week to clean the yard and mow the lawn. That’s the “offer” part of the contract. You say you will pay him $30 per week. That’s the “consideration.” He can “accept” the contract by promising to be there or nodding his head. If he doesn’t say anything, but shows up next week and does the work, he has accepted your offer by his own performance. You will be legally obligated to pay him $30, unless you told him you were withdrawing the offer before he showed up.
An oral agreement such as this one with the gardener is just as valid as a written agreement. That’s why it is risky to think a “contract” is only valid when it’s in writing. You create an enforceable legal obligation long before you sign the written contract if you and the other guy have orally agreed on a final deal.
Oral contracts are not less binding than written ones; they are just more difficult to prove in court.
A person can’t claim that a contract did not exist when you have his signature on a written agreement to wave in front of his nose. But when there isn’t anything in writing, the other party may say he never agreed. Even more common, you and the other party will agree that there is a contract, but will disagree about its terms and conditions. And without written evidence, the court is left to decide whose memory is more precise.
There are, however, certain kinds of contracts that must be in writing to be enforceable. A rule of law, called the “statute of frauds,” lists the kinds of contracts that must be in writing. Each state has its own list, but the following contracts are usually on the list:
--Contracts that last more than one year. (So if you wanted the gardener to agree to keep mowing the lawn for 15 months, you would have to get it in writing, or he could get out of the promise because it was not in writing.)
--Contracts for the sale of land.
--Contracts for the sale of personal property valued at more than $500.
In California, dance- and health-studio contracts, car-repair estimates and contingency-fee agreements with a lawyer must also be in writing.
The most obvious advice for anyone about to sign a written contract is to read it carefully. It’s surprising how many contracts are not read before being signed, especially form contracts. Just because it’s on a printed form doesn’t mean it’s any less enforceable. Certain printed-form contracts may be “contracts of adhesion,” when the parties are not in equal bargaining positions and the terms violate fairness or public policy. They are not enforceable and will be discussed at some length in a future column.
If you don’t understand a provision in a contract, have it rewritten so you do understand it, or take it out of the agreement. Almost any contract can be changed, so don’t be afraid to speak up, negotiate and demand changes. If you are making changes on a written form, be sure to have both parties initial each change. In fact, both sides can categorically decide to cancel a contract if they both agree.
You may be able to get out of a contract if you were under age 18 when you signed it, or were induced to sign it because of misrepresentations or undue influence.
But unless you have a valid legal reason for failing to complete your side of the bargain, you can be sued for breach of contract and ordered to pay for the damage naturally resulting from your failure. In some cases, you can be specifically ordered to perform your end of the deal.
For more information about contract law, ask the California Bar Assn. for a free copy of the pamphlet “What Should I Know About Contracts?” Send a self-addressed, stamped, business-size envelope to State Bar Pamphlets, 555 Franklin St., San Francisco, Calif., 94102.
Attorney Jeffrey S. Klein, a member of The Times’ corporate legal staff, cannot answer mail personally but will respond in this column to questions of general interest about the law. Do not telephone. Write to Legal View, You section, The Times, Times Mirror Square, Los Angeles 90053.