When is it a good idea to have a contract?
A contract is an agreement between at least two people or companies, in which they each promise to do something for the other in exchange for a benefit for themselves. That can be something simple, like, "I will pay you $10 to wash my car." Or, it can be something a lot more complicated.
When is it a good idea to have a contract? Any time you want to make sure the agreement you are entering into can be enforced. Otherwise, the other party can always say that there was not really any agreement between you.
You can enter into a contract without writing down the terms if, for example, you tell someone you will do something for him and he promises to pay you for it (like washing a car for a price), it is an oral contract. You do not always have to put it on paper and sign it. However, if you do not have it in writing you will not have something to point to that contains all the terms you want the other party to perform --or proof of what you told the other person that you would do.
There are some kinds of contracts that must be in writing, and those are often established by the Statute of Frauds--a general rule of law that has been established over time. The kinds of agreements included in the Statute of Frauds vary in different jurisdictions, though, so you may need to find out the laws of your state governing written contracts.
Here are the kinds of contracts generally required under the Statute of Frauds to be in writing:
- Contracts that, by their terms, can’t be performed within a year.
- Contracts for the sale of goods that cost more than a specified amount of money--usually $5,000 according to Section 2-201 of the Uniform Commercial Code, another general rule of law which has been adopted by many states.
- Contracts for the sale of an interest in land.
- A promise made in consideration of marriage, like a prenuptial agreement.
- A promise to pay debts on behalf of another.
- A promise by an executor of an estate to pay some of the estate’s debts.
If your agreement is not one included in the Statute of Frauds where you live or where your deal is to be transacted, then you may enter into an oral contract, but beware. Oral contracts are sometimes said to be worth the paper they are written on. And as you may know, even written contracts are subject to interpretation, so they should be as precise as possible regarding what you want them to say.
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