Whether or not both parties need to sign a contract for it to be valid depends on the type of contract. While some contracts must be in writing to be valid, many contracts do not require a writing, or signatures of the parties.
In this article, we will discuss what is needed for a valid contract in Wisconsin, Including:
- Contracts that Must be in Writing
- Oral Contracts
- What Can be Used as Evidence that a Valid Contract Exists?
- What are the Requirements for a Valid Contract?
Contracts That Must Be in Writing
Some contracts require a writing to be enforceable. Agreements dealing with real estate generally require a writing. Wisconsin Statute 706 governs “every transaction by which any interest in land is created, aliened, mortgaged, assigned or may be otherwise affected in law or in equity.” Real estate transactions, under Wisconsin Statute 706.02, require that a writing, in addition to identifying other things, be signed by both parties if it involves a lease or contract to convey. However, a deed, which conveys ownership of real property, need only be signed by the grantors (those giving the land). The Grantee’s (those receiving the land) do not need to sign the deed.
Other agreements that require a writing include agreements that will not be completed within a year, and promises to answer for the debt of another (Wisconsin Statute 241.02(1)). Contracts that include consideration above a certain dollar amount should also be in writing, even though it is not always necessary for such a contract to be enforceable.
Generally, if a writing is required, both parties need to sign for the contract to be valid and enforceable.
Oral Contracts
Many contracts do not require a writing or signatures to be valid. This is what might sometimes be referred to as a “handshake” agreement. If there is a conflict between parties that ends up in court, courts can look at the parties’ conduct, or evidence of the parties’ intent to determine if there was, in fact, a valid agreement between the parties. Oral contracts could be for bartering, services or goods. Rental/Lease agreements can be orally made and still be valid. The more complex and/or expensive an agreement is, the more likely a writing would be appropriate.
What Can Be Used as Evidence that a Valid Contract Exists?
As stated above, with oral contracts, evidence of the parties’ conduct or intent can generally be used to determine whether or not a valid contract exists, or what the terms of that contract are. However, things can be a little more difficult with written agreements.
The Parol Evidence Rule is a doctrine that applies to written contracts. The rule basically means that when there is a written agreement, no outside evidence should be used to determine what the parties agreed to. In other words, if there is a written contract, evidence such as what the parties discussed, agreed to orally, or in writing, before signing the agreement, is not relevant.
For the Parol Evidence Rule to apply, the written contract must be a “complete integration.” Often contracts have language such as: “This Agreement sets forth the entire agreement between the Parties hereto, and fully supersedes any prior agreements or understandings between the Parties.” Or “This written contract contains the final and complete agreement of the parties.” This language indicates that the agreement is a completely integrated. An agreement is completely integrated when the parties intended that it be final and complete, and that there are no missing or ambiguous terms.
If a contact is incomplete and missing essential terms, there may be no valid contract at all. If an agreement is incomplete, or there are terms that are missing or ambiguous, it may be a “partial integration.” If the contract is only partially integrated, outside evidence still cannot be used to contradict the terms of the contract. However, parol evidence (outside the agreement) can potentially be used to make clear the missing or ambiguous terms, and add to the existing, but incomplete contract.
For example: Imagine Allan and Bob have a signed contract where Allan agrees to sell Bob 60 reams of paper for $500 a month every month for two years. The contract says nothing about how the paper will get from Allan to Bob. Because the contract has a missing or ambiguous term regarding delivery, it may be only partially integrated, and parol evidence from outside the contract could be used to add to the existing agreement.
Consider the following three pieces of evidence: 1) It is the case that Allan agreed orally to deliver the paper to Bob. 2) For the first 6 months, Allan delivers the paper to Bob. 3) Allan delivers paper to all his customers, and that is standard for paper sellers.
If the contract is only partially integrated, this evidence could be used to support adding a term to the contract regarding the delivery of the paper, but not to modify other terms of the contract that are clear. If the contract was completely integrated (parties intended it to be final and no missing or ambiguous terms), then this evidence could not be used, and the final contract would be the only evidence allowed.
What are the Requirements for a Valid Contract?
While some contracts require a writing, as discussed above, the fundamental principles required for a valid contract are: 1) Offer 2) Acceptance, and 3) Consideration.
- Offer
- An offer needs to be addressed to a specific person, who must understand it as an offer and have the capacity to accept it. An offer must be definite in its terms, so that it is clear whether or not the agreement has been kept or broken. An offer must, once accepted, bind the offeror such that there is a valid and enforceable contract.
- Acceptance
- There are many ways to accept an offer. Sometimes acceptance requires both parties signing an agreement. Sometimes acceptance can be done verbally. Sometimes acceptance can be conduct continuing the terms of an agreement. What is required for acceptance may depend on the circumstances of the agreement. An acceptance cannot change terms, add conditions or limitations to the offer, otherwise it is a counteroffer, not an acceptance.
- Consideration
- Something of value must be exchanged. If only one party is giving up something of value, then it is likely a gift, not a contract.
- (Capacity and Legality)
- While not a requirement per se, some people lack the capacity to enter into a valid and binding contract. The most common group that lack capacity are those under the age of 18. Also, there cannot be a valid contract to do something that is illegal.
We hope that this article has been a useful resource. Having an attorney can help you deal with contract disputes. If you would like the help of an attorney with your issue, please contact O’Flaherty for a consultation.
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