WRITTEN CONTRACTS
By
D. Reed Freeman, Jr.
Arent Fox Kintner Plotkin & Kahn, PLLC
A deal done on a handshake - "You do X for me, and I'll pay you Y" - is a contract, because it is a legally enforceable agreement involving an exchange of promises. Most contracts are enforceable whether they are oral or written. Nonetheless, you should always have written contracts for all your business relationships.
There are several reasons why written contracts are better than oral contracts:
The process of writing down the contract's terms and signing the contract forces both parties to think about - and be precise about - the obligations they are undertaking. With an oral contract, it is too easy for both parties to say "yes" and then have second thoughts.
When the terms of a contract are written down, the parties are likely to create a more complete and thorough agreement than they would by oral agreement. A hastily made oral agreement is likely to have gaps that will have to be resolved later - when the relationship may have deteriorated.
With an oral contact, the parties may have different recollections of what they agreed on (just as two witnesses to a car accident will disagree over what happened). A written agreement eliminates disputes over who promised what.
Some types of contracts must be in writing to be enforced. The Copyright Act requires a copyright assignment or exclusive license to be in writing (see "Assignments" and "Licenses" in the Ownership of Copyright Law Summary). State law requirements vary from state to state, but in most states, a contract for the sale of goods for $500 or more must be in writing.
If you have to go to court to enforce a contract or get damages, a written contract will mean less dispute about the contract's terms.
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What is a Contract • Written Contracts • Offer And Acceptance • Consideration
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