By Lane V. Erickson, Idaho Business Lawyer
Real life involves contracts. In fact, even if you never actually talk to, use or even see a lawyer, it’s still likely that you have several contracts in your life that you are a party to right now while you are reading this article. Additionally, if you are involved in any type of business operation it’s likely that contracts are a regular part of your life and business.
It’s not uncommon that when people find out what I do for a living they start asking me questions about contracts that they are dealing with as part of their life. It could be a rental agreement, or it could be a contract for the purchase of a home or a car. I have also had people ask me questions about the student loan contract that they are dealing with and trying to pay off, or the credit card collection notice that causes them to ask me about their contracts. Regardless of what type of contract it is, one of the most common questions I am asked is, “Am I bound by the contract I signed?”
For more than 70 years, our premier team of Idaho business lawyers at the Racine law office, have assisted business clients in creating, reviewing, entering into and resolving contacts and issues that come up involving them. We take the time to get to know our clients and their businesses so that we can provide the best legal counsel possible in protecting our clients and their interests. Doing this often includes reviewing contracts that already exist to see if our clients are really bound by them.
Just to be clear, there’s usually no magic bullet that allows you to get out of a real contract that you voluntarily entered into. Having said that, the purpose of this article is to help give you some ideas about whether or not you are bound by a contract that you signed. We will start by looking at whether there is actual real contract in place. Additionally, we will look and see if there are any reasons that the contract may not be enforceable. We will also discuss what happens if both the parties decide they want to change something even when there is a binding contract that exists.
Is It a True Contract?
Before we can really determine whether you are bound by a contract, we have to understand what the contract is to determine if all the requirements under Idaho law have been met. In Idaho, a contract is “a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law recognizes a duty.” Atwood v. Western Const., Inc., 129 Idaho 234, 238, 923 P.2d 479, 483, (Ct.App. 1996). A promise is “a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.” Atwood, 129 Idaho at 238, 923 P.2d at 483. Generally, Idaho courts will not permit a party to avoid its contractual obligations. Smith v. Idaho State University Federal Credit Union, 114 Idaho 680, 284, 760 P.2d 19, 23, (1988). Idaho Courts have long held that “an agreement voluntarily made between competent persons is not lightly to be set aside . . . because it has turned out unfortunately for one party.” Stearns v. Williams, 72 Idaho 276, 283, 240 P.2d 833, 837 (1952).
A contract could be written or oral. Written contracts are the easiest to determine if they are valid because you can actually read the documents and see if they meet all the requirements necessary to create a contract. Oral contracts are also often enforceable, but they are sometimes difficult to prove because there may not be documents to show what the parties actually agreed to. If that’s the case, we often have to look at the party’s actions to determine what the terms and conditions of a contract may be.
As was stated in the law cited above, if a true contract is found to exist it’s not necessarily easy to get out of. Rather, if a true contract exists the parties to the contract are required to perform all the terms and conditions in the contract that they agreed to. But don’t let this discourage you because there may be other options to explore.
Are There Any Reasons the Contract May Not Be Enforceable?
If we determine that in fact a true contract exists, then we need to move on to see what the actual terms and conditions of the contract are. In other words, we need to determine what the parties to the contract are actually bound to do. This is accomplished by reading the language in the contract. Doing this allows us to determine whether in fact there is any way that performance under the contract can be excused or the contract itself can be terminated.
Again, this is usually easiest when we’re talking about a written contract. This gives us the ability to read the actual language that the parties agreed to. Often in contracts there will be termination language that allows either or both parties to terminate the contract either at anytime they want, or when some triggering event occurs. By reading through the language in the contract we can help you understand if there are any terms or conditions that allow the contract to be terminated.
Additionally, if the other party fails to perform some essential function or portion of the contract, this may provide you with an excuse for not performing your part of the contract. However, before you think that you are excused from performing the contract you should speak with a qualified business attorney who can give you an opinion about whether in fact you do have a right to not perform your portion of the contract. Even when the other party does something you believe is wrong, the last thing you want to do is fail to perform some portion of the contract you are required to perform, which would result in a breach of the contract and a right of the other party to bring a lawsuit against you.
What Is It the Other Party Wants to Do?
Even if a contract is binding on both parties, it’s possible that both parties may want to change the terms of the contract. In my experience as a business lawyer, we often come across situations where both parties have some regrets about the contract that exists. Sometimes it’s not necessarily regrets but sometimes parties wish they had done things differently. If both parties to an enforceable contract agree that the contract should be changed, the parties can change it in any way that they both agree upon. Again, this could be done either orally or in writing, but we almost always recommend to our clients that it be done in writing.
When both parties agree, a contract can be terminated, it could be amended, you could have addendums attached to it, or it could simply be replaced by a brand-new contract. Again, it all comes down to whether both parties have agree to the changes. A written and signed agreement provides evidence of the intent of both parties to agree to something different than what the original contract required.
If you are concerned about whether you are bound by the terms of a contract, or if you are concerned about what you can do with a contract that does exist, we can help.
ENLIST AN IDAHO BUSINESS ATTORNEY TO HELP YOU
Our team of Idaho business lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877-232-6101 or 208-232-6101 for a consultation. You can also email us directly at lane@racineolson.com or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.