What is a contract? More than just an idle or gratuitous promise, a contract arises at law when two or more persons agree to bind themselves to mutual legal obligations by an exchange of “consideration,” or things of value. These things might be performing tasks, providing personal property, or agreeing to provide these things once one or more conditions are met. While parties do not usually have to put a contract in writing for a court to enforce a contract, usually it is a good idea. Here are some simple reasons why.
While parties don’t usually have to put their contract in writing for a court to enforce it, a lawyer will almost always recommend putting a contract in writing so that the terms are clearly understood and provable. For an exchange of promises to have the force of law, there must be a “meeting of the minds” between the parties. In other words, the parties have to intend to enter into a contractual relationship subject to particular terms. Whether the parties have manifest that intent – and what the particular terms might be – are difficult to prove in court without a writing that at least memorializes the agreement.
Usually, there’s no legal requirement that parties put their contracts in writing. These so-called “oral contracts” are enforceable…except when they aren’t. Some contracts have to be in writing. In Virginia, contracts for the sale of real estate are one kind of contract that the law might require be in writing. Under Federal law, a transfer of copyright ownership also has to be in writing. Other subject matter may have to be in writing by law, depending on the state in which the parties make the contract.
There is an extensive body of law regarding what state’s law (or whether federal law) might control a particular legal claim. You can remedy this problem in a contract, by specifying what law will apply to your written contract.
Unlike other common law countries, the United States and its constituent jurisdictions usually don’t award attorney’s fees to a person that wins a lawsuit. A prevailing party, may, however, get attorney’s fees where allowed by statute or in rare circumstances where a court case has established the right to recover these fees. A prevailing party can also obtain attorney’s fees if a contract permits it.
A lawsuit can take place in a lot of different places, including where the alleged injury took place. This may create a significant inconvenience for you–requiring time, effort, and money expended in hiring an attorney far away from your home base, and possibly requiring you to travel to a far off jurisdiction. A written contract can override this by requiring a specific jurisdiction for all lawsuits, usually so long as the named jurisdiction has some relationship to at least one of the parties.
The bottom line: to protect your business, a written contract is often the way to go.
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