by Ben Haltenhof
Picture yourself in front of a judge, trying to find a way to enforce a “handshake” agreement that has gone bad. No matter how solid your memory might be, how are you going to prove what you think the terms of your agreement are when the other side disagrees with you at every turn, honestly remembering a different term? At the beginning of what we hope to be a fruitful relationship, not many people want to talk about what happens if the deal falls apart, but the reality is that these things do happen and it’s important to be protected.
He said she said that we had a deal.
In Missouri, oral contracts are enforceable in much the same way as written contracts. Generally speaking, if you and another party agree to the terms of a deal and those terms are definite, a court will enforce those terms. There are, of course, exceptions to every rule. For example, in Missouri, agreements to lend money, sell property, lease property, and to perform any action that cannot be completed within one year (such as employment), all must be in writing. There are exceptions to these rules as well, but to be safe, all such agreements should be in writing.
If you have a valid oral agreement that one of the parties has broken, you may find yourself in court. Hopefully, you have taken detailed dated notes concerning the terms of the agreement. Even if you did, if the parties still disagree about what the actual terms were supposed to be, a Missouri court may set the value of the services based on what the evidence shows is “reasonable value” for such goods or services. This may or may not be what you bargained for when you agreed with a handshake and, of course, now you’ve had to go through litigation that was likely drawn out and expensive to get to this result.
Written in Stone (Or… on Paper).
While there are certainly issues of interpretation when it comes to written contracts, a well-drafted agreement is easier to enforce than a verbal agreement. A written agreement that describes the goods or services to be provided, the compensation for those goods or services, the timeline of completion, and who the parties are is a good start. You will also want the agreement to contain an explanation of what will happen if one party falls behind or fails to perform entirely. Other important terms (indemnification, insurance, etc.) should be discussed with your lawyer.
So what happens when one party fails to live up to the terms of the written agreement? A court might look at the dealings of the parties outside of the written words on the paper, but most contracts are enforceable as written. Thus, you have comfort that what you agreed to will govern your relationship.
Write this down.
Obviously, not every agreement can be written. Sometimes it is simply impractical to write something down. But the safest and surest practice is to get everything in writing before proceeding based on the agreement, and make sure those written agreements protect you in the case of future problems.
Ben Haltenhof is an Associate with Sandberg Phoenix & von Gontard, working with clients ranging in size from small businesses to global corporations. Ben has developed considerable experience in general business law, including formation, governance and agreements; business transactions such as mergers and acquisitions. Contact Ben at 314-446-4374 or visit SandbergPhoenix.com
Submitted 5 years 152 days ago