When does a handshake agreement between two parties become a contract? Does every agreement or contract need to be in writing? What if one party to a contract fails to live up to the agreement?
In the commercial world, agreements and contracts are a daily necessity. Manufacturers need suppliers of materials or parts. Merchants need goods to sell to consumers. Employers need set rules and obligations for their employees.
Colorado, like every other state, has adopted much of the Uniform Commercial Code (UCC) that was created in 1952 with the aim of standardizing laws concerning commercial transactions and contracts.
If you need help drafting a contract, understanding the provisions of a contract you’re about to sign, or solving a dispute in or around Nederland or Broomfield, Colorado, contact us at The Law Offices of Daniel T. Goodwin. Our commercial contract attorneys can assess your situation, needs, and concerns, and help you reach the best available outcome.
What Constitutes a Contract in Colorado?
Colorado law defines a contract as “an agreement between two or more persons or entities. A contract consists of an offer and an acceptance of that offer and must be supported by consideration. If any one of these three elements is missing, there is no contract.”
Suppose Company A manufactures parts for drones, and Company B assembles drones for sale. Company A offers to supply the computer chips necessary to fly Company B’s drones, and B agrees. You thus have both offer and acceptance of the offer. What is compensation? Company B agrees to pay a set dollar amount for each chip to Company A, and this constitutes consideration. The two companies now have a contract.
Does it have to be in writing? Not necessarily, but almost every attorney will tell you to get it in writing — and for good reason.
The agreement can become one of three types of contracts. It can remain simply an oral contract, basically a handshake and a spoken commitment by each party. It can be written, even if either Company A or Company B’s representative just writes down the details on a page of notebook paper and hands it to the other party. It can become implied if the two companies continue the relationship over time with nothing in writing or perhaps nothing more than a phone call to initiate the whole transactional history.
The best approach, of course, is to get every detail of the offer, acceptance, and consideration in an attorney-reviewed business contract, which is where our team at The Law Offices of Daniel T. Goodwin can help you immensely.