There are plenty of teachable moments in the practice of law. The most common one is a client who learns, too late, that they should have put a contract in writing.
Oftentimes I get asked whether a contract needs to be in writing in order to be legally binding – that is, a contract that is enforceable, either for the payment for services rendered or to ensure the services are actually rendered.
The simple answer is no, it doesn’t need to be in writing, but good luck trying to get a court to enforce the terms of the contract if it’s not in writing. And, if you do get it in writing, make sure the terms are crystal clear. Cover all the five W’s – who, what, when, where and why – and then add one more: if there’s risk involved, make sure everyone knows bears the risk.
Consider a recent case where a farmer delivered some produce to a wholesaler who was then going to resell the produce to one or more third parties. The farmer believed the wholesaler was buying the produce and then re-selling it for whatever profit he could manage. The wholesaler believed he was accepting a consignment, and if the produce couldn’t be sold at a profit, the farmer would share in the losses.
In the end, the court found the wholesaler entered into a cash purchase for the produce. Why? Because the farmer had taken the time to write an invoice for the wholesaler. In the world of contract law, although oral terms can form a contract, documents are considered more reliable evidence.
For the wholesaler, it was an expensive lesson learned: next time, get the contract in writing.