Writing an agreement is in many respects similar to writing and/or obtaining an insurance policy. You want the agreement to contain provisions that will protect
you and your interests as much as possible.
Will It Be Legally Binding?
The formation (or creation) of a contract requires certain steps or elements before it will be legally binding. They are: offer, acceptance, consideration, and in
some cases the formality of a written document. These items are summarized below:
An offer occurs when one party indicates a willingness to enter into an agreement, conveys that information to the other party, and sets forth the terms of an
agreement. An offer remains open until revoked, rejected, the party dies, or the subject of the agreement is destroyed.
Acceptance occurs when the second party indicates a willingness to accept the terms of the offer. Sometimes "offer and acceptance" is called "mutual assent"
or a "meeting of the minds". Meaning that both parties understand and agree to the terms.
Consideration means that something of value must be exchanged between the parties. An agreement that is all one sided will not be a valid contract.
Must it be Written?
While many agreements do not need to be written to be valid, the fact that an agreement is reduced to writing fulfills a number of important purposes, these
include: (1) it is tangible evidence that the parties have reached agreement, (2) it helps each of the parties remember and therefore keep their agreements, (3) in
the event of ill feelings or a difficult situation it provides the parties with closure, and (4) it reduces the areas of potential future conflict. In other cases, the
agreement must be in writing of the contract is not valid and enforceable. For example the UCC 1 provides that agreements for the purchase of goods
exceeding $500 must be in writing and the statute of frauds requires that agreements for the purchase of real estate must be in writing. It is always best if your
agreement can be reduced to writing.
How Detailed Should the Agreement Be?
This is more of a dilemma that you may think. You want your agreement to be a simple and as short as possible, while still covering each of the important
element of the agreement. People do not like to sign long complicated documents. Yet future disagreement or problems can be reduced by making the
agreement longer and more inclusive.
You also need to understand the concept of diminishing returns. This means that for each additional attempt at clarification the size of your document will
increase geometrically. For example, 90 percent of most parties concerns can be treated in 1 to 3 pages. The next 5 percent of their concerns can be covered
in approximately 7 pages. But the last 5 percent of their concerns will require increasing numbers of pages per percentage point resolved. As the agreement
gets longer, it becomes prohibitive in terms of cost, time, and emotion. The trick is to create a balance between length and covering the key issues. It is
important to understand that no agreement will be perfect. The Courts are full of cases where agreements written by attorneys are being argued about.
General Rules of Agreement Writing
The following are some basic rules that apply to all types of agreements:
(1) As to each element of the parties' agreement ask yourself: Who, what, where, when, why, and how?
(2) To minimize error, take your time when writing an agreement. Agreement writing is hard work, but you don't need to be an attorney to write a good
(3) Each should review the agreement to make sure that it is correct and that each understands its terms. It is often helpful to have the parties explain to each
other in laymen's terms what they understand the written phrases in the agreement to mean.
(4) Each party should have a copy of the agreement. They should also have the opportunity to have that agreement reviewed by an attorney before they sign it.
(5) The ideal agreement should provide procedural (order, equity, and ownership of the dispute), substantive (the terms should be equitable, practical, and
achievable), and emotional (the agreement feels right and is better than their best alternative to a negotiated agreement) satisfaction to each party.
(6) The agreement should be typed or printed in black ink so that it is legible. And,
(7) Finally, make sure that the agreement is complete and includes all of the expectations of the parties.
Most written agreements should avoid "legalease" or technical language. The following language recommendations may be helpful to you:
(1) Use simple clear language. If the parties understand the agreement they are more likely to keep its terms. You may however, use technical language if each
of the parties understand it.
(2) If a Court or an Administrative Agency must review and approve the document, have the parties select an attorney to convert their agreement to legal ease.
(3) Each of the provisions in the agreement should use active voice, be direct, and to the point. For example: "John will pay Mary $50.00 in cash by noon on
March 3rd 1998" versus "Mary will be paid."
(4) Write out dates, numbers, dollar amounts, and proper nouns; so there will be no confusion in the agreement.
(5) Use neutral language. Avoid any language that may attribute blame or fault to one or other of the parties unless they specifically consent to do so.
(6) The language of the document should flow smoothly. Read it out loud to be sure that it does.
(7) Be precise in your use of language. Avoid sloppiness which may lead to future problems. Use standard dictionary definitions or define in the document
anything that may give rise to questions later.
(8) And finally, the agreement should include only the obligations of the parties. They cannot bind or guarantee the actions of third parties.
Rules of Construction
The following construction rules may be helpful in drafting your own agreements:
(1) Whenever possible use short separately numbered paragraphs.
(2) Alternate the parties agreements or concessions in separate paragraphs dealing with only one issue at a time so that it appears that the agreements are fair
(3) Be specific as to details such as time, place, method of payment, etc.. Watch for detail that may have been omitted.
(4) In complex agreements the overall document should be organized either chronologically (by task) or by legal issue. Use headings to keep everything neat.
(5) Make the final document look professional. Use correct punctuation, spelling, and layout.
Who Should Write The Agreement?
Some of the most effect agreements are those which are jointly written by the parties to the dispute. However, if one or both of the parties do not feel
comfortable writing their own agreement, they should work together to create a "wish list" of the items that they feel the agreement should include. That list can
then be taken to an attorney who can create the final document. Doing this work up front, will dramatically reduce the cost of the attorney's services.
The following is a sample agreement that may be of use to you in creating your own:
We, Ted Smith and William Jones , agree to the following:
1. That this agreement is enforceable as a contract and may be used as evidence in any subsequent proceeding in which any of the parties allege a breach of
2. Ted Smith agrees to give to William Jones cash in the amount of $50.00 before noon on November the 15th, 1998.
3. Willam Jones agrees to accept the $50.00 as full payment for the work done on Ted Smith's car.
4. Ted and William agree that in the future they will discuss their concerns directly with each other.
Party Signature ________________________ Party Signature _________________________
Getting Out of a Contract
There are a number of defenses that can be raised in contract situations. The chart below lists a number of these.
|Statute of Frauds|
||Statute of Limitations|
Defenses to offer include mutual mistake, unconscionable contracts, fraud, or illegal contracts. Mutual mistake occurs when the two parties understand the
agreement differently. This often occurs when vague terms are used or one party is unfamiliar with legal terms of art. Unconscionable occur when it would be
"unconscionable" to force a party to perform their part of an agreement. Fraud, occurs when an individual may be induced to make an offer through false
representations. An illegal contract would include things like the sale of drugs or offers of prostitution.
Defenses to acceptance include. Making a counter offer, mutual mistake, unilateral mistake, statute of frauds, and incapacity. A counter offer does not act as an
acceptance but rather as a new offer. Unilateral mistake means that the person accepting the contract did not understand its terms. And incapacity, generally
refers to age or metal inability to contract
On occasion one of the parties may lack the capacity to enter into a contract due to their age, disability, or status. For example, in England during the 1800s,
women could not enter into contracts nor could Indians or aliens. If a person is under "disability" meaning they lack the capacity to enter into a contract, the
contract is considered voidable. Meaning it can either be terminated or when the party is no longer under disability it may be ratified. Or in other words made
Unenforceable contracts based upon the statue of frauds, statue of limitations, or an illegal act is considered void
As a general rule, once a valid contract has been entered into both parties are required to perform their duties under the agreement. Failure to perform can give
the non-defaulting party the right to enforce the agreement.
Breach of Contract
A number of different remedies are available in the event of breach of an agreement. These include specific performance, recission, restitution, compensatory
damages, consequential damages, and liquidated damages. The chart below is a summary of these remedies.
Remedies for Breach
||Must complete their duties under the contract.|
||Canceling the contract.
||Getting the consideration you paid back.|
||The value to the non-breaching party if the other party had
||Damages that resulted from a parties breach of the contract.|
||An amount of damages set forth in the contract.|
Other Contract Terms
A number of other important contract terms that can affect your agreements are contained in the chart below:
Other Contract Terms
||Conditions that must be met prior to the other party being
required to perform.|
||A change in the parties agreement.
|Accord and Satisfaction
||The parties have a dispute as to the terms of the agreement
and agree to resolve that dispute according to agreed upon
||A third party has stepped in and assumed liability under the
||The contract cannot be performed for a reason that is not the
fault of the non-performing party.|
On occasion, an agreement will contain conditions that must be met prior to the other party being required to perform. For example, an agreement might state
that payment is due within 30 days of receipt of the goods. If the goods do not arrive for six months payment is not to until the seventh month.
It is also possible for the parties to modify their agreement. Usually, this occurs as a result of accord and satisfaction, novation, or impossibility.
Accord and satisfaction means that the parties have a dispute as to the terms of the agreement and agree to resolve that dispute according to agreed upon
terms. For example, in a case where one party alleges that $3000 dollars is due on the contract and the other party believes that the correct amount is $2000,
the parties could agree to settle for $2300. This would be accord and satisfaction. If the parties resolve their agreement by accord and satisfaction, a writing is
generally required. Often the words payment in full on a check can be sufficient if there is in fact a true dispute on the dollar amount. If there is no dispute over
the amount simply putting the words payed in full on a check will not be effective.
Novation means that a third party has stepped in and assumed liability under the original agreement.
Impossibility means that for some reason the contract cannot be performed. For example, the contemplated activity is now illegal, an earthquake has
swallowed up a building that was to be sold.