How much Writing is Enough Writing to Form a Valid Contract?

As we discussed last week, certain contracts must be in writing and it’s a good idea for all business contracts to be in writing. But what constitutes a “written contract” under the Statute of Frauds? A valid contract can be formed on an index card or napkin or even in a string of letters or emails. Courts will look at whether the communication is from a person authorized to enter into the contract, whether there is an offer and acceptance, and whether a third party could determine what the agreement was.

It may not matter that both parties haven’t physically signed an agreement. Email signatures count as signatures, and if a party performs their obligations under the contract, it may not matter that the party never signed.

Contracts do not need to contain much “magic language” to be valid, but they do need to name the parties, be signed by both parties, and the price needs to be stated or determinable. If certain terms are missing, often the Uniform Commercial Code can fill the gaps, such as delivery or shipping terms, risk of loss, and warranty. In addition, both sides need to give “consideration,” which is the exchange of something of value. Usually, one party promises to provide a good or service, and the other side promises to pay for it. Sometimes one party offers not to do something (called forbearance), and the other party promises to pay, such as when one party agrees to settle a claim or one party promises not to compete.

Contracts are one of the most important devices to help a business minimize its risks. Do you have a good form contract for your business?