Small Claims & Consumer Help

Small Claims - Contracts

Contracts

Contracts Issues and Problems: Whether you actually have a contract

Many problems in the legal system arise based on contracts, and many problems could be avoided, and costly legal fees saved, if people better understood basic principles of contract law.

First, understand that you should always contact your Plan Attorney and discuss your problem with them. This is just a general discussion and not designed for you to act exclusively upon. Also understand that whether to file a lawsuit, or whether someone will file a lawsuit against you, depends a lot on the amounts of money involved. Losses under $200 with no other physical or mental injuries, may not be worth your time and money. Id the amount lost or for which you are being sued is over $10,000, consult your Plan Attorney, if you are a member.

For those problems where the losses or damages are between $200 and $5,000 it may be useful to consider the Small Claims Court forum as a way for recovering your losses. In order to bring this lawsuit a general discussion of contract law may be helpful.

In very general terms, contract law involves an offer, an acceptance or rejection, counter-offers, consideration and certain conditions. Not adhering to the terms of a contract, once made and if valid, may subject a person to a lawsuit for damages. Obviously, the first place to start is whether there is a contract.

Offer

To determine whether you have a contract, you must determine if there has been an offer. An offer can be made by a person or entity and it can be oral or written. The person making the offer must intend to have been serious about the offer. ["I'll give you my car if you change the oil" stated jokingly is not a valid offer.]

Offers usually do not have to be very specific and courts will often examine evidence and imply certain terms. However, to avoid confusion later, if you are making an offer, make it as specific as you can on every term you consider important, such as price, delivery, color, repairs, etc. Obviously, while it is not required you certainly ought to put this offer in writing, even when it is with family and friends. Lawsuits involving contracts with relatives form a large portion of all court lawsuits today.

You ought to put an expiration date on your offer. For example, if you offered to pay $5,000 for a car to its owner, and your offer was not immediately accepted, then you bought another car with the money. The first offer might technically still be valid and deemed accepted by the first car owner, and you could end up possibly having to pay the money for the first car also. Not having the money is rarely an excuse or a defense.

Offers do not have to include all of the terms of any agreement. If you offer to buy a car and the offer is accepted, you may not argue later that you never selected the color, so therefore no offer existed. You can make this argument for other reasons, but it is not likely to convince a judge in this situation that no offer was made.

Naturally, there are many different types of offers and offer situations which can be discussed. Lawyers spend years studying these situations and what constitutes an offer. The purpose of this discussion is to assist in understanding the basics. Nothing in this discussion is designed to constitute advice on every type of matter or fact situation.

Acceptance

Another requirement to have a valid contract is that an offer must be accepted by the person(s) to whom it was made, or intended to be made.

An acceptance of an offer can be made in the same manner as the offer was made, or in a different manner. If the offer was written, it may be accepted orally, or by even a nod or grunt. Again, it is helpful to include all of the terms which you believe to be acceptable in the acceptance, and to make the acceptance in writing. This helps if you ever have to present this evidence in court.

You should know that the concept of a counter-offer is also critical to understand here. If a person makes an offer to sell you his car for $5,000, and you respond "I'll buy it" you have accepted his offer and you have a valid contract, so long as all the other terms can be determined or implied.

But if you were to respond to the offer with this response, "I'll buy it, but I will only pay you $4,000", you have made a counter-offer. This is not an acceptance, because you have changed the terms of the offer. In fact, your answer is a rejection of his offer. You must now await his acceptance. If it is not forthcoming, you will have no contract.

Also, you should be careful to understand that many people will "low-ball" a person who desires to sell something. Be careful, because if you respond that you will buy something for a real low price, you may have made an offer, and that person may accept your offer. That person would be able to sue you for the money in many instances.

What happens when offers and rejections cross?

If a person makes an offer to you and agrees to hold it open for two days, then you reject it after one day, change your mind after the rejection but before the deadline has passed, and then you accept - do you have a contract? No. Once you reject, you cannot turn around and accept, unless the other party allows you to do so.

Also, what if you mail your acceptance and the person making the offer calls you to withdraw the offer. Is there a contract? The answer depends upon the mode by which the offer was communicated to you. If it was mailed to you, then the offer may be deemed accepted, as soon as you placed your acceptance in the mail. [But remember, you may have the burden of proving this, so remember to protect yourself by having a creditable witness be able to testify about the time and place of mailing.]

If the offer was communicated to you verbally, then it will likely be deemed withdrawn before being accepted, even if you put your acceptance in the mail before the verbal communication. The reason? The person making the offer has a right to rely on the fact that you have not accepted in the same manner as he made the offer, prior to his withdrawal.

Be sure to understand these technicalities when deciding to sue to enforce a contract or to defend yourself in a lawsuit on a contract.

Consideration

Each contract must have as an essential part of its terms some consideration. Consideration in the law has the meaning of something of value. The purpose of this consideration is to assist courts in determining whether a gift is intended. A very general theoretical rule is that if there is consideration, there is usually a contract and not a gift. There are plenty of exceptions, however.

Consideration is a difficult concept to explain, and once again hours can be spent discussing proper consideration and whether it was part of an alleged contract. Here, we are only concerned with the basic concepts to assist you in analyzing your situation. Consideration does not always have to be money. It can be promises to do something, or even promises not do something, but it does have to be promised at the same time as the contract was made. For example, "I promise to stop drinking if you promise to stop smoking." This may be sufficient consideration to qualify as a contract, if the other elements of a contract exist. But, a person who promises to wax your car, and does it, and then a week later says "Now you owe me $50, is not entitled to the money. The $50 was not part of the agreement and hence, while the person may have spent his time waxing and may have lost several other jobs, he is not entitled to his money in this deal. [Note: there may be certain other legal theories under which he could sue you for the $50 and possibly recover his money. While his theory may be weak, he might ask the court to imply the $50 as a missing term of the deal (so long as $50 was a reasonable value for the work performed.) He might also ask the court to award him quantum merit damages, which means the value of his services. Again, there are all types of nuances and exceptions to these principles and this is not intended to discuss anything but the basics.]

Writings?

Most contracts do not have to be in writing as we have seen and can be oral. However, certain contracts must be in writing. Laws vary by states, so you should check your state law. Several types of contracts which must be in writing are:

  1. Contracts for real property;
  2. Contracts which may last for more than one year;
  3. Contracts for the sale of goods over a certain price (usually $500);
  4. Contracts to assume another person's obligations; and
  5. Premarital and Marital contracts.

Anytime you agree to make a contract it is wise to put the contract in writing. This way, you can be sure it is enforceable. Again, any questions in this area should be referred to your Plan Attorney especially where serious amounts of money are involved.

Modifications of Contracts

Contracts are often modified after they are signed and in operation. You should understand that the courts will allow parties to modify terms of an agreement, even if the original terms were in writing and the modification is not. For example, you agreed to buy 30 cartons of milk per month from a person for $30. If after the contract was written and agreed to, you only were provided with 29 cartons each month and you still paid $30 knowing about this deficiency, you would think that the milk supplier may owe you several cartons of milk for those not provided each month. Right?

Not always; if you sued the milk supplier, he/she might argue that since you accepted the 29 without complaining and you still paid $30, that you agreed to modify the original contract. Thus, your repeated acceptance of 29 instead of 30, may have constituted a waiver of your rights to 30.

Also, the milk supplier might also argue that it is industry custom to supply numbers at the rate of plus or minus 10% of the actual number specified. He would argue that this industry custom should have been known by you, and that it is industry wide, and as such this custom served to modify your contract. Thus, he could be short as many as 3 bottles each month and still not have breached the contract.

Whether the milk supplier will win or lose depends upon his evidence and the judge's opinion about your acceptance of this reduced amount each month. Your job would be to introduce evidence to show that you did not accept this each month and fully expected the milk supplier to "get caught up".

Of course, your best evidence would be a letter to the supplier, informing him of the deficiency and informing him that you were not modifying the contract and that you expected him to perform and supply you with the full 30 cartons. This is an excellent illustration of what to do if the terms of your agreement seem to change after the contract and you do not like the changes. You must specify these in writing and your objection to said changes. If you decide you can live with the changes, you may not need to take any action. But you should be aware that you may not be able to "sit" on a problem and then later protest if it fits your needs.

Points to Remember

  • An offer can be made by a person or entity and it can be oral or written.
  • Make the offer as specific as possible.
  • Offers do not have to include all of the terms of any agreement.
  • Acceptance is required to have a valid contract.
  • Counter-offers do not constitute acceptance.
  • Consideration means something of value and is an essential part of a contract.
  • Consideration does not always have to be money.
  • Some contracts do not have to be in writing and can be oral.
  • Contracts can be modified after they are signed.


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