MAKE SURE YOUR CONTRACTS ARE ENFORCEABLE
No doubt you have heard the warning "Get it in writing." That’s good bottom-line advice, but simply "getting it in writing" may not be sufficient. If a written contract contains vague or contradictory provisions, it may be so ambiguous that a court cannot determine the parties’ agreement from the writing itself. In such cases, the judge may allow the parties to orally testify about their deal. If that happens, you really have not "gotten it in writing" because the other party’s recollection of the deal may differ from yours, to your cost.
Here’s another scenario. Say you have an unambiguous contract but you’ve neglected to include a key provision. In that case, you still have not "gotten it in writing" because the court may not even let you testify about the deal. An example of this sorry result is an Illinois appellate case decided on February 23, 2003, between two scrap metal dealers, Universal Scrap Metals and J. Sandman and Sons.
The dispute between Universal and Sandman involved a clause known as a "right of first refusal." Typically, this clause requires one party, in this case Sandman, to offer something to the other party, in this case Universal, before offering it to anyone else. The clause required Sandman to offer its business to Universal before selling its business to anyone else. Unfortunately for Universal, the right of first refusal clause was not enforceable because its provisions were not sufficiently specific. Even worse, Universal was not allowed to orally testify about the deal because the contract was not ambiguous. Instead, Sandman was allowed to sell its business to a third party without first offering it to Universal.
Amazingly, the right of first refusal clause neither specified the price that Universal would pay Sandman, nor did it provide a definite method to determine the price. Instead, the clause simply stated that the parties would mutually agree on the price through negotiations. In the court’s view, the contract, although missing an essential term—namely, the price—was unambiguous because none of the provisions were contradictory or unclear. In other words, the missing essential term made the contract unenforceable and oral testimony about the deal was not allowed because the contract was unambiguous.
The lesson in the Universal case is, make sure your written contracts are both unambiguous and comprehensive, clearly containing all the essential terms of your deal. Otherwise, you have not really "gotten it in writing," and your contract may be unenforceable.
