How Important are Written Contracts?
Chances are that at some point in your life, you’ve heard the phrase, “put it in writing”. And while most people would rather not have to deal with contracts, they’re everywhere around us and play a major role in the way we live our everyday lives.
People have been entering into agreements since the beginning of mankind. Unfortunately, most people (including business owners and their employees), lack sufficient understanding as to what constitutes an enforceable contract. The truth is that the manner in which business is conducted today significantly differs from how business was conducted just a few decades ago.
Statute of Frauds
If you find yourself wondering whether you need a contract, you should first understand the statute of frauds...and no, it’s not a law that prohibits fraudulent activity. The statute of frauds refers to a collective body of statutes (i.e. laws) that requires certain types of agreements to be (1) made in writing and (2) signed by the party/parties to be bound, in order for the agreement to be enforceable. And every state in the United States has laws addressing these requirements, with the exception of Lousiana.
Five Contracts Covered by the Statute of Frauds
There are five different types of agreements typically covered by the statute of frauds and must therefore be made by written contract: (1) Agreements for the sale of an interest in land; (2) Agreements made in contemplation of marriage; (3) An agreement of an executor/administrator to answer for a duty of his decedent; (4) Suretyship agreements (i.e. contracts to answer for the duty of another); and (5) Agreements that are not to be performed within one year. While most of these types of contracts are relatively straightforward, you should understand that anytime it is possible that a contract may take longer than one year to fully perform, it is vital that such contract be made in writing to ensure it can be enforced.
The Uniform Commercial Code
The Uniform Commercial Code (commonly referred to as the “UCC”) also has statute of frauds provisions and require the following types of agreements be made in writing: (1) Contracts that sell goods equal to or greater than $500 (UCC 2-201); (2) Lease contracts where the total payments due exceed $1,000 (UCC 2A-201); (3) Contracts for the sale of securities (UCC 8-319); and (4) Contracts that create a security interest in personal property if the property is not in the secured party’s possession, a certificated security, or collateral that consists of deposit accounts, investment property, letter-of-credit rights, or electronic chattel paper if the secured party has control over such collateral (UCC 9-203(b)(3)).
The Right to Void a Contract
Now that you’re an expert on the topic, do you still want to enter into a handshake deal? Because of the statute of frauds, a party may be able to void an agreement that wasn’t made in writing and signed by the party (or parties) to be bound, including the identity of the parties to the contract, a clear presentation of the subject matter, along with the material terms and conditions contained therein. Therefore, it’s vital that your agreement not only be made in writing, but that it also contains the terms material to the deal.
If you’re interested in having an attorney draft, review, and/or negotiate your contract, contact us for a free consultation today.
Author: Christian Fong, Esq. is a Miami based business and intellectual property attorney dedicated to assisting entrepreneurs, startups, as well as small and medium-sized companies, in a variety of industries and at all stages of their businesses. He can be reached at (786) 607-3664; christian@cfonglaw.com.
Disclaimer: The content above is a discussion of legal issues and general information; it does not constitute legal advice and should not be used as such without seeking professional legal counsel. This information is not intended to create, and reading or viewing does not constitute, an attorney-client relationship. All trademarks are the property of the Law Office of Christian Fong, P.A. or their respective owners. Copyright 2016. All rights reserved.
