That’s what these two businessmen thought when they committed the terms of their rather complex business arrangement to a two-page, handwritten contract and each signed it. Their homegrown contract, written on notebook paper, provided that they would “complete formal contracts as soon as possible, but this is binding.”
Six months later, things went sour and no “formal contracts” were in place. Seven years’ worth of litigation (including two trials) later, the court upheld the validity of the contract and the jury awarded the plaintiff $10.5 million.
Free Legal Advice Department — A few lessons here about contracts:
1. Spending a little time with a lawyer up front can prevent you from spending lots and lots of time with lots and lots of lawyers down the road, if things go badly.
2. Things go badly much more often than you might think.
3. Some things that look like contracts are not contracts, but some things that don’t look much like contracts very well might be contracts.
4. Words matter.
5. Be careful what you sign.