Idaho Business Law do I Have a Contract? Part 2 - A Written Contract

By Lane V. Erickson, Idaho Business Attorney

In last week’s article which was Part 1 of this series, we started with the basics of what it takes to create a valid contract. If you haven’t read Part 1, we encourage you to go back and look that article over as well. In today’s article, we will continue with discussing whether a valid contract exists as a way of helping you better understand how to use contracts as part of your business.

We previously mentioned that if you are running a business, then it’s likely you are dealing with contracts on a regular basis. These contracts could involve your employees, your retailers or suppliers, your clients or customers, or any number of other individuals that are a regular part of your business transactions. Whatever it is, it’s important for you to understand whether the contracts you are working with are valid, and what your rights and obligations are under those contracts.

The attorneys on our premier Idaho business law team at the Racine law office include partners Lane Erickson and TJ Budge, and attorneys Nate Palmer and Dave Bagley. Each of the attorneys on our team is skilled, knowledgeable, and experienced in assisting clients with their business needs including dealing with a variety of contracts.

If you have specific questions or concerns about the contracts you use in your business, we encourage you to contact us for a free 30 minute consultation where we can discuss your questions and determine how we can help you best.

In today’s article we’re going to be focusing on written contracts. Specifically, on whether the contract you are considering entering into needs to be in writing in order to be enforceable. In addition to that, we will discuss what constitutes a written contract. Finally, we will discuss whether the contract must be signed and if so how.

Under Idaho law, certain contracts must be in writing to be valid. This is called the statute of frauds. Idaho’s specific statute states as follows:

9-505. CERTAIN AGREEMENTS TO BE IN WRITING. In the following cases the agreement is invalid, unless the same or some note or memorandum thereof, be in writing and subscribed by the party charged, or by his agent. Evidence, therefore, of the agreement cannot be received without the writing or secondary evidence of its contents:

1. An agreement that by its terms is not to be performed within a year from the making thereof.
2. A special promise to answer for the debt, default or miscarriage of another, except in the cases provided for in section 9-506, Idaho Code.
3. An agreement made upon consideration of marriage, other than a mutual promise to marry.
4. An agreement for the leasing, for a longer period than one (1) year, or for the sale, of real property, or of an interest therein, and such agreement, if made by an agent of the party sought to be charged, is invalid, unless the authority of the agent be in writing, subscribed by the party sought to be charged.
5. A promise or commitment to lend money or to grant or extend credit in an original principal amount of fifty thousand dollars ($50,000) or more, made by a person or entity engaged in the business of lending money or extending credit.

In addition to the above, when it comes to the sale or purchase of what is known as “goods”, which are tangible property in a commercial transaction, an additional statute exists. This additional statute states as follows:

28-2-201. FORMAL REQUIREMENTS — STATUTE OF FRAUDS. (1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

(2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within ten (10) days after it is received.

(3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable

(a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or

(b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or

(c) with respect to goods for which payment has been made and accepted or which have been received and accepted (section 28-2-606).

Based on these statutes, and just common sense, we find it to be a good practice to have every contract in writing. Doing this makes it much easier for both parties to the transaction to understand what the terms and conditions of that transaction are. In other words, there’s no room for a misunderstanding of what the contract actually means and what it requires.

So, what exactly creates a written contract? A written contract could easily be a formal contract that is typed up and presented to both parties. But this is not all. A written contract could include other types of writings such as emails, letters, memorandums, and other similar types of documents that could be put together to show what the understanding and agreement was between the parties to the contract.

In other words, not all written contracts are formal. Sometimes the contract is informal and contained in one or more emails that go back and forth between the parties. However, so long as these writings collectively show what the terms and conditions of the agreement are in such a way that a third party could easily understand what the agreement is, then a valid written contract may exist.

Finally, the last question is whether the contract has to be signed in order to be valid. Additionally, what constitutes a signature under Idaho law. In other words, do all contracts need to be signed?

It is true that not all contracts need to be signed to be valid. Ascent or agreement to a contract could be verbal. However, if you are dealing with the statute of frauds, then clearly a signature is required.

Under Idaho law, a signature could be a formal signature by the person themselves, or it could be a notation, or a signature made by another person who has authority to sign for the person being bound to the contract. Additionally, a signature could be electronic in the form of an email or a text message and still be valid as a signature to the contract.

If you have questions about whether a written contract is necessary in your transaction, or you have other questions concerning contracts as part of your business operation, we can help. We have assisted numerous business owners in all aspects of their businesses including dealing with written contracts. If you have questions, we encourage you to contact us for a free 30-minute consultation where we can answer your questions and help you with your business needs.

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 free 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.