One of the questions that many business owners share is “what types of contracts need to be in writing?” Many people actually assume that a contract has to be in writing in order for it to exist. While I agree that all contracts SHOULD be in writing, many do not HAVE to be in order to be enforceable.
The Statute of Frauds dictates that 6 types of contracts must be both written and signed. I am going to list the 6 types for you:
- Contracts in consideration or marriage
A. Like a “prenup”
- Contracts which cannot be performed within 1 year
A. Like a gigantic construction project, which will take at least two years to finish
- Contracts for the transfer of an interest in land
A. Remember all that paper work you had to wade through last time you bought or sold a house?
- Contracts by the executor of a will to pay a debt of the estate with their own money.
A. I am guessing you don’t have a lot of experience with this one – me neither 😉
- Contracts for the sale of goods over $5,000.
A. This can mean either one item cost over 5 k, or that you are selling scooters at $50 a pop and the contract calls for 101
- Contracts in which one party becomes a surety (acts as guarantor) for another partys debt or other obligation
A. Like co-signing on a car loan
Now, just because these are the only 6 types of contracts that must be in writing there are plenty of good reasons to put all contracts in writing:
1. Nobody’s memory is really that good
2. Verbal communication can be misleading and confusing to follow
3. People interpret things much differently. (Go play the child hood game ‘telephone’ again)
And the list really goes on and on. So, tip for the day – put your contracts in writing.