We define a contract as a legally binding agreement between parties. It’s established in the contract the way that parties make an exchange. Its purpose is ensuring to the parties the existence of a legal remedy in case one party breaches the contract. If the contract has non-enforceable terms, the parties might run into problems getting their rights. Around the idea of a contract, there are a lot of misconceptions (or contract myths) that could lead the parties into serious consequences. Businesses enter into different types of arrangements and agreements on a daily basis and it’s important to not fail to consider the contractual implications.

Here are some of the most common contract myths that you should know about (and avoid)

Myth #1: The existence of a “Standard Contract”

What usually is referred to as a standard contract could be actually terms that are common practices related to specific industries, but there is no need to be bound by those standards. In legal terms, there are no terms that could be considered “standard” in that the law requires the parties to agree.

Contracts are for the most part what the parties consider that work for them and what they want them to be. It’s important to understand this especially because it means that if you want to enter into an agreement, you will be free to negotiate what you want, and if any term doesn’t fit for you, you can negotiate it.  

Myth #2: All contracts have to be signed

As long as it’s possible, it will be superior for you to write and sign your contracts and pursue the purpose of proving its existence and terms. But if the contract doesn’t exist, this doesn’t mean that the wronged party will have no rights.

Existent legal theories called “quasi-contracts” can work as alternative legal claims in the event a party takes to court a case where it doesn’t exist a contract between the parties. These types of theories aren’t as effective as a contract is, especially because sometimes it can be difficult to find proofs, but they are available as an option to get at least some recovery. 

Myth #3 One template can fit all contracts

It’s usual to find businesses where the practice of changing just a few words of a contract to make it work for other deals and situations. Some contracts can be made versatile for day-to-day use. Standard terms and conditions and a wide range of services, goods, and business agreements can be usually capable of being adapted and have several uses.

Without specific guidance and legal advice, re-using a contract without proper modification can be dangerous. As potential consequences, the re-used contract may contain elements truly inappropriate or oppressive whether intentionally or not. Therefore, we provide a library of free contract templates, that will help you generate error-free contracts.

Myth #4: My terms and conditions apply to the contract

The terms and conditions your business got drawn up have to be properly incorporated into contracts. It’s really common that businesses will go through have their terms prepared and then won’t bring them to the other party’s attention before the formation of the contract.

It could happen that the other party might try to impose their terms on the contract. The simple fact of having a sentence in the terms that says that they apply to the exclusion of any others won’t be enough. It’s actually very probable that the other party’s terms have a similar sentence. In this situation is essential to establish the terms that would apply to avoid any other further complications. 

Myth #5: You definitely need a lawyer to draft contracts

A written contract drafted by an inexperienced person may be worth nothing or even expose you and your business to more liability than if you didn’t even have a contract. This myth is related to the idea that having a lawyer to draft a contract is necessary. In some cases, yes. But if you’re getting the same contract drafted repeatedly, why not automate the process.

This is one of the most common contract myths. Note that non-appropriate legal terms might expose your business to potential risks. The business might even transpose legal terms from other contracts it has entered.

Myth #6: The contract terms are always enforceable

This is generally true, but there are exceptions that apply. Terms that violate certain laws won’t be enforceable by a court. Another example that could sometimes apply as an exception is non-compete clauses that courts will not always enforce. Courts also may still accept oral modifications to the contract, even when a no-oral modification clause was previously agreed by both parties. 

Myth #7: All contracts have a “cooling off” period

It’s widely thought that after signing a contract it exists a period of time where a party can change its mind for a period of time that’s usually around 3 days. This is a common error because this period doesn’t exist for every kind of contract. A general rule to consider and check if this time period exists or not is verifying if the contract includes a clause that mentions the party’s right to cancel. 

Myth #8: Boilerplate terms are unimportant

Among the contract myths is the one that says boilerplate terms are unimportant. Boilerplate clauses are common clauses usually found in contracts. These clauses are not the material terms of the contract, however here are included state’s laws, dispute jurisdictions, parties’ relationship. On these terms might reside the difference between having an enforceable contract or not.

Myth #9: If it’s written and signed it is legal

Contract terms have to be also fair to be legally binding. If the party finds that the terms are not fair, they can challenge it and bringing in court if necessary. Enforcers also can bring several cases to stop you from using the contract. It’s also important that everything included in the contract is readable and anything that could have a significant impact on the parties has to be highlighted. Otherwise, the term will be considered unenforceable.

Also, in order for any contract to be valid, the parties must have the capacity to contract. This means that they are of the age of majority and have the ability to understand the contract they are signing.

Myth #10: An advertisement can’t create a contract.

You must be extremely careful with the way you advertise your business, or you may find that your advertisement has created a legally binding contract with your costumers. If the advertisement is clear on all the offers’ aspects, a court may find the advertisement as a creating contract. If your business refuses to honour the advertisement the court may enforce the advertisement’s terms.

10 Contract Myths to Avoid in 2020 Infographic - contractawesome.com

We hope these myths gave you an idea regarding the misconceptions (contract myths) associated with contracts. ContractAwesome helps you create, manage and automate your contract, all from one, safe place.