While written contracts are always recommended, parties often operate based upon verbal, text message, or email communications. But can parties form a “contract” if they do not have a written document? Yes. A contract does not need to be in the form of a signed document to be binding. To form a binding contract, the following must be true:
While written contracts are always recommended, parties often operate based upon verbal, text message, or email communications. But can parties form a “contract” if they do not have a written document? Yes. A contract does not need to be in the form of a signed document to be binding. To form a binding contract, the following must be true:
Offer: One of the parties made an offer to do or refrain from doing something in the future.
Consideration: Something of value is promised in exchange for the specific action or non-action. This could be money, a promise to perform a service, or an agreement to not do something.
Acceptance: The other party accepted the offer unambiguously. Acceptance could be expressed through words, actions, or simply performing as called for in the contract. In general, the acceptance must mirror the terms of the offer. If the party accepting the offer adds additional terms, this is called a “counteroffer” and is legally considered a rejection of the original offer. If the original offering party does not unambiguously accept the counteroffer, then no contract has been formed.
Mutuality: The parties have a “meeting of the minds” regarding their agreement, meaning they mutually understood and agreed to the basic subject matter and terms.
Based on these four elements, a binding contract could be formed through text message, email, or even through verbal communications. If there is sufficient detail to prove an offer, consideration, acceptance, and mutuality, a binding contract can exist without the parties signing anything (excluding certain transactions that require a written contract, which can vary by state).
Another frequent question is whether the parties may change the original contract terms through a text message or email. Generally, no. The terms of a signed contract may typically only be altered through a new document signed by both parties. In the construction industry this is often called a “change order.”
An easy solution is to insert a clause in your agreements stating that both parties may consent to changes through text or email. In this age of electronic signatures, it is reasonable to agree that if both parties clearly consent to the change, then a text or email confirmation can be binding.
I always recommend a written contract. However, if you performed work based on a text, email, or verbal communication, it is probable you can still hold the other party accountable if an offer, consideration, acceptance, and a “meeting of the minds” can be proven.
