THE HAND YOU SHAKE TODAY CREATES 4 BIG RISKS

Contracts can be written or unwritten. The 4 biggest risks in entering into unwritten contracts are:

1. The hand you shake today may not be there tomorrow to explain the deal and explain performance issues.

2. Unmet expectations can cause memory failure. A written document helps keep memories from fading. Often, expectations are not fully communicated, and one party may be blindsided by the other party's "forgetfulness."

3. Texas law adds provisions to certain contracts, as explained below, which may change the intended contract in very material ways. When something goes wrong and one party becomes more concerned about what the law will allow, instead of what the deal was, these additions can produce drastic results. A written contract can limit the effect of such laws.

4. It may not be enforceable. Texas law requires certain types of agreements to be in writing and signed by the parties in order to be enforceable.

SOME AGREEMENTS MUST BE IN WRITING TO BE ENFORCEABLE

Texas has a "Statute of Frauds" (Chapter 26, Texas Business and Commerce Code) which requires certain agreements to be in writing and signed by the person to be charged with the agreement, such as:

1. A loan agreement as defined in the statute;

2. A contract for the sale of real estate;

3. A lease of real estate for a term longer than one year;

4. An agreement which is not to be performed within one year from the date of making the agreement;

5. A promise by one person to answer for the debt, default, or miscarriage of another person (e.g. guaranteeing someone else's debt);

6. An agreement made on consideration of marriage or on consideration of nonmarital conjugal cohabitation;

7. A promise or agreement to pay a commission for the sale or purchase of: (a) an oil or gas mining lease; (b) an oil or gas royalty; (c) minerals; or (d) a mineral interest.

8. A promise by an executor or administrator to answer out of his own estate for any debt or damage due from his testator or intestate;

9. An agreement, promise, contract or warranty of cure relating to medical care or results thereof made by a physician or health care provider as defined in Section 1.03, Medical Liability and Insurance Improvement Act of Texas.

While this statute is extremely technical and certain exceptions exist, if an agreement described in this statute is not in writing and signed by the parties, it is most likely not enforceable.

SIGNED, SEALED AND DELIVERED

Once the decision is made to put the contract in writing, the next issue is what to include in the agreement. The obvious issues to be addressed in commercial transactions include pricing, payment and delivery of goods, and credit terms. But other issues are just as important, such as:

BUT TEXAS LAW MAY RADICALLY CHANGE YOUR AGREEMENTS

The law often automatically adds many terms to agreements. In Texas, the "common law" and statutes such as the Texas Uniform Commercial Code and other consumer protection laws intervene and change commercial agreements. Understanding the effects of these laws on your agreement, and including written provisions in your contracts to limit, change or alter these effects, is critical to obtaining the agreement you intend and maximizing the protections available to you under the law.

AND PERFORMANCE MAY CHANGE THE AGREEMENT

Unfortunately, often contracts are not followed, and perhaps are not even read, unless and until one of the parties fails to get what they thought they would receive from an agreement. At that particular point in time, not only does the law take into account the written contract, it may also take into account the performance of the parties during the term of the contract.

Clients should therefore continue to consult with their attorneys after a contract is signed, sealed and delivered. Performance during the term of the contract may obviously be planned. And this performance may change the meaning of the contract. So it is just as critical in commercial transactions to maintain contact and communication between the attorney and client during performance of contracts, so that the client's position may be strengthened as much as possible should a dispute ever arise.

REPRESENTATIVE CONTRACTS

Our business client base includes manufacturing and construction businesses with blue collar work forces, white collar businesses, hi-tech concerns, retail businesses, professionals, and local franchisees of national franchise companies. We have worked on a such a wide variety of contracts that any list would hardly begin to show the breadth of our experience, but the following list may give you some indication of our experience:

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