An Oral Contract Isn’t Worth the Paper it’s Written On

Friends and colleagues ask me all the time, “John, what kinds of things should I include in my written contract for a car? For a new home purchase? In a business transaction?”

Friends and colleagues ask me all the time, “John, what kinds of things should I include in my written contract for a car? For a new home purchase? In a business transaction?”

I have always found it helpful to use a checklist as a reminder of potential issues that should be considered.

Here are some of the things on my checklist that may be useful to you. The entire checklist can be found in the book, “How to Build a More Lucrative Law Practice” by Noel Stevenson.

Definitions: Define any terms used in the contract which are open to interpretation, but remember that definitions are dangerous.

Parties: Names and addresses of parties. Avoid using “party of the first part”, “party of the second part”. Instead, identify parties by “Smith” and “Jones”, “buyer” and “seller” or “Lessor” and “Lessee”, “Exclusive Agent”.

Legal Status: Ascertain the marital or legal status of the parties.

Date of Execution: The date of the contract. It is advisable to avoid the use of an “as of” date, as it indicates that the contract was not signed on that date.

Effective Date: The effective date of the contract.

Arbitration: Provision for arbitration disputes.

Age and Competence: Are the parties competent to contract? It isn¹t advisable to rely on appearances, sometimes an eighteen year old looks and acts over twenty-one. As for mental competency, usually all one can do is observe and hope for the best.

Jurisdiction: Consider including a recital of the law of what jurisdiction should apply to the contract.

Time is of the Essence: Is it advisable to provide that time is of the essence of the contract?

Performance Duties: Include in specific terms what performance each of the parties is liable for and the time when each obligation is to be performed.

Future Changes to the Law: Make provisions for any future change of the law or administrative regulations which would affect the parties.

Performance/Reason for Delays in: Make provisions for strikes, acts of war, acts of God, or any other catastrophes which prevent or delay performances of one of the parties.

Consideration: What is the consideration of the contract?

Modification: Provide that any modification of contract must be in writing.

Payment of Money: State the time and place of payment of any money.

Damages/Default: Provide for damages, if any should be paid, in case of the default of a party.

Cancellation/Provision for: If any party to the contract has a right to cancel the contract, include provision for such cancellation.

Paragraph Headings: Consider including paragraph headings such as “Insurance”, “Notices”, “Covenant Not to Compete”. If these paragraph headings are included, provide in the contract that these subject headings are for the sake of convenience and are not a part of the contract.

Conclusion

Good luck with your agreements. Remember the most important thing in writing an agreement is that it should be designed to provide for real or potential ambiguities and difficulties – not for litigation. Unless your contract concerns high six-figure agreements, you should stay away from lawyers and litigation – it¹s too expensive – trust me! Remember, every one of these issues is negotiable. Use this checklist and you will be able to Negotiate like the Pros™.

John Patrick Dolan, Attorney at Law, Certified Specialist Criminal Law, CSP, CPAE is a recognized expert in the field of negotiation. He travels throughout the world presenting lively keynote speeches and in-depth training programs for business and legal professionals. Call 760-775-3739 for more information.

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