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We’ve Got a Contract! (Sort of)

Cole Law Group BlogWhen my daughter was very young, she went through a phase where she would create “clubs” that she would then ask friends and family members to join. These clubs were usually fan related, e.g. the “Hannah Montana Fan Club”, or cause related, e.g. the “Save the Sea Lions Club.”  The process of joining the club was usually very simple; all you had to do was sign next to the “x” on her membership list and you were in.

Picture now a November night in 2004. I am in my home office reviewing documents while simultaneously trying to participate in a conference call when my daughter approaches with what I perceive to be her typical club application. As I struggle to manage documents while cradling the phone to my ear, she holds a paper up and whispers, “Daddy, sign here!”  As usual, I sign at the “x” and then quickly return to my call.

Shortly after the conference call is concluded, my daughter dances into the office singing, “I’m getting a puppy!  I’m getting a puppy!”  In an attempt to suppress her enthusiasm, I reply, “You know, your mother and I have had a discussion about this, and I am not sure we can get a puppy this year.” Whereupon, my daughter proclaims, “Yes, I am getting a puppy!  You signed a contract!” and held up the paper I had signed which, to my chagrin, clearly stated at the top of the page, “I Todd Cole hereby agree to give a puppy to my daughter for Christmas.”

So was my daughter correct?  Was I contractually obligated to buy her a puppy for Christmas? Before answering that question, a quick review of contract law is warranted.  To begin with, there are generally three types of contracts; a) express, b) implied in fact, and c) implied in law.

An express contract is an agreement, the terms of which have been explicitly spelled out. The agreement can either be written or oral. Common (and significant) contract terms are subject matter, price, quantity, type of work to be performed, date of delivery of goods or completion of services, and how payment is to be made.  In the case of my daughter’s Christmas wish, her contract was written and contained some of the above terms, as the subject matter was a puppy (quantity 1) to be delivered on Christmas morning (date of delivery of goods).  Her contract would, therefore, be considered an express contract.

However what if, instead of my daughter presenting me with a written contract to sign, we had instead made a deal over the dinner table that, in exchange for her making her bed every morning before Christmas, she would receive two dollars which she could then use to purchase her puppy.  Let’s say I started off keeping to the deal and paid my daughter $2 / day as she diligently made her bed every morning.  On December 1st, however, I decide this deal isn’t really a good one for me and, after my daughter makes her bed that morning, I refuse to pay her another $2.  Here, there exists an unambiguous offer, an unambiguous acceptance, and a mutual intent to be bound.  A court could, therefore, find that a contract implied in fact had been formed and I was obligated to continue paying my daughter as long as she continued performing under our contract.

A contract implied in law is a legal fiction created to prevent injustice or to avoid unjust enrichment.  A contract implied in law operates as a valid contract for purposes of providing a remedy only; the general rules of contract do not apply.  As an example, let’s say that while eating at the dinner table, I begin to choke on a chicken bone.  My daughter, even at her young age, has learned about the Heimlich Maneuver and rushes to my aid.  After saving my life, my daughter sends me a bill for her services for $200, which coincidentally happens to be the price of a Christmas puppy. Under these circumstances, a court could find my daughter should be compensated for the very important service she rendered and provide her with an award equal to the value of that service.

Having completed this quick review, we now know that my daughter had me sign an express written agreement obligating me to provide her with a puppy on Christmas morning.  Did it matter that I did not realize what I was signing?  A mistake is an error in the meaning of words, laws, or facts which causes one or both parties to enter into a contract without fully understanding the outcomes or responsibilities implied by the contract. Here, only one party (me) made the mistake of believing the contract was to join a club and not for a puppy (my daughter was extremely clear on that point) and, therefore, a unilateral mistake occurred. 

A court usually has two remedies to correct a unilateral mistake.  First, if I could show that my daughter knew I was unaware that the document I signed was for a puppy (and that essentially she was tricking me), then the court might order rescission, which completely cancels the contract and restores both parties to their pre-contract positions.  Second, if the dispute between my daughter and me was not whether she would get a puppy, but whether that puppy would be a Great Dane or a Chihuahua, the court could order reformation or a modification of the contract to reflect our initial understanding of the breed she was to acquire. Neither of these outcomes would, however, be assured.

My last hope of avoiding a Christmas puppy lay with something called consideration. In contract law, consideration is broadly defined as a bargained for exchange of value between parties to a contract. Exchange of value does not always mean money; it can also be property, a promise, or doing or not doing something. Here, my daughter’s contract for a puppy runs into some trouble and would most likely be voidable as, under her contract, I promise to give her a puppy, but I receive nothing in exchange.  How much value is needed for the consideration requirement to be satisfied?  Over time, the amount of consideration necessary has dwindled, with most courts now finding a “peppercorn” of consideration enough.

So, you might ask, did I play the consideration card or was there a puppy under our Christmas tree that year?  The answer is that there was not only one puppy but two. My son, upon learning of my daughter’s contract, very quickly took the position that he was a third-party beneficiary and therefore was also entitled to a puppy (a topic beyond the scope of this discussion).

If you take anything away from this blog post, please remember — never sign anything without reading it first. If the document is extremely long, or technical, and your eyes are crossing after a few minutes, consider hiring an attorney to review it and to assist you in understanding what your rights and obligations may be before executing the agreement.

Cole Law Group would be happy to help.  Just call us at (615) 490-6020 to arrange a consultation. 

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