Most modern legal thought on contract law is heavily influenced by ancient Greek and Roman thought. Plato’s treatise The Laws touches upon the essential procedures for canceling contracts.

The Romans went on to build upon advancements made by the Greeks. They subdivided the Greek conception of the general contract into discreet categories each with their requirements. They created, for example, four different types of consensual agreements and four different types of contracts that dealt with property rights.

In the middle ages and throughout the industrial revolution, the development of contract law closely paralleled the development of trade. The famous Magna Carta, for example, guaranteed European merchants and traders a “safe and secure” exit and entry to England “for buying and selling by the ancient rights and customs.” In many ways, a clear, codified, and centralized system for dealing with and developing contract law was essential for the proliferation of trade. So the more people traded, the more contract law was established and extended.

By the 16th century, English judges had already declared “a promise on a promise will maintain an action upon the case.” This set the stage for modern contract law to emerge. An 18th-century English judge and politician put it aptly when he said, “the law of merchants and the law of the land is the same.” And indeed, this continues to be the case today.

Modern American Contract Law is deeply rooted in traditional English Common Law, and in the Graeco-Roman thought that preceded that. Samuel Williston, the editor of the very first Harvard Law Review, authored and published the influential “Law of Contracts” in the early 1920s. This legal treatise has become the foremost authority on the topic of contract law. Upon Williston’s work is built the Uniform Commercial Code and Restatement (Second) of Contracts which form the basis of modern contract law today.

A good lawyer who is an expert in contract law is necessary to minimize the risk of your contract being the next bullet point. They not only craft contract language, but also test contract language to the breaking point.

The greatest legal hazard when it comes to contracts is, as it turns out, overconfidence. Certainly, entrepreneurs and business owners are more often than not right to assume that they are the smartest people in the room. They alone know the product or service, their company, their industry, and the goals of the contract in question. However, business acumen does not translate into legal insight. Many business people overestimate their ability to competently negotiate commercial agreements and underestimate the many hidden legal hazards.

Another great hazard is the tendency to look at the relationship behind the contract only in the context of the moment.  At that moment, the parties may have a great “meeting of the minds” on the relationship and they feel no need to take great care in documenting it.  Too often though, as time goes on, the initiators of the contract have retired or moved on, memories have faded, or business realities have changed the business landscape.  It is then that all will look to the contract very coldly and often with unfamiliar eyes for their rights and obligations.

While most good-faith negotiators do not intentionally include legal pitfalls and loopholes (although some do), it is important for non-lawyers to realize that contract drafting traps are often invisible to the untrained eye. A single misplaced comma or the inclusion of or omission of a single word could spell the difference between a fair and robust commercial agreement and one that is destined to fail.

As many contract experts will note, it is not what is in the agreement that worries most legal experts, it is what is NOT in them.

Things such as remedies for breach, rights of termination, the transfer of intellectual property, and other legal obligations may often be overlooked or underestimated by entrepreneurs and business people through no fault of their own. They just haven’t been trained and are not expected to see the nuances of a contract. Expert contract lawyers are prepared to see those hidden legal hazards, and that’s why a good contract lawyer is essential.

While it may not be a good idea for business people to draft commercial or business contracts themselves, that does not mean they do not have an important role to play in the creation, testing, and execution of legal contracts.

Instead, business people must be at the negotiating table with lawyers to avoid any hidden pitfalls. Often, only the business person understands and possesses the technical, economic, and business logic and minutia of a business relationship.

By leveraging the business mindset in collaboration with lawyerly expertise, together business people and contract lawyers will be best able to craft a robust and comprehensive commercial contract. The business person points the way, and the contract lawyer or lawyers find the safest legal path to get there.

Contracts describe each party’s responsibilities.

Who is responsible for providing what goods or services, for what price, at what standard, and when.

A written contract can provide a trustworthy basis for what each party can expect from a transaction, thereby reducing the chances of misunderstandings or conflicts.

Generally, it is bad business to be in conflict with customers, suppliers, partner firms, or other companies. By clearly spelling out the expectations of a particular transaction, contracts help businesses avoid getting bogged down in disagreements.

Hand-in-hand with defining responsibilities, contracts also clearly identify each party involved in a transaction and their relationships with each other.

The number one predictor of a healthy business climate is stability and predictability.

Contracts and contract law provide both by ensuring that future promises are kept and obligations fulfilled.

For example, a company that enters into a contract with a customer to ship a predetermined amount of product on a regular schedule will have the freedom to plan for the future.

A company that sells its product day-to-day and month-to-month without a contractual guarantee of purchases will not be able to plan for growth or make long-term strategic decisions.

Contracts are nothing more than promises that can be enforced by some higher authority.

In business, promises that cannot be enforced are worthless, since there are no consequences or remedies for breaking those promises. Furthermore, for a transaction to proceed, all parties must trust that each party will fulfill its obligations.

Contract law provides an easy shorthand for strangers or unaffiliated businesses to trust each other without having to spend many years building trust.

Contracts help businesses avoid conflict by setting out the terms of a transaction.

However, in the event of a disagreement, professionally-written contracts also provide measures and guidelines for conflict resolution or remedies for a breach. This can help businesses avoid lengthy litigation in court and suffering damages without recourse or remedy.

Ultimately, contracts provide companies with a measure of legal protection from being harmed when a party breaks its promises.

Contract law protects all businesses, and the entire economy, by providing a basis for trust and predictability in the marketplace.

An agreement is often described as a “meeting of the minds”. In legal terms, this means two or more parties have come to a mutual understanding of their duties and obligations as well as the future performance of those duties and obligations.

It is important to note that an agreement, or a meeting of the minds, does not automatically result in the creation of a contract. Agreements in and of themselves do not make a contract. However, a so-called binding agreement or an enforceable agreement is considered to be a contract.

While non-contract agreements, such as verbal agreements, do not tangibly state terms and conditions, some legal rights may still apply. There are, for example, many occasions where the substance of an email conversation has been deemed strong enough to constitute an actual, enforceable contract. Likewise, a simple verbal agreement can become a binding agreement, or contract, by virtue of being “completed,” or, in other words, as based on the parties’ actions. This simply means that all the terms and conditions agreed upon have been met as based on the parties’ actions.

Finally, while not all agreements are considered contractually binding, almost every agreement dispute can be taken to court. Even a conflict over verbal agreements can be litigated. If this occurs, it is important to have a knowledgeable contract lawyer by your side as the actions and conduct of parties involved will be used to determine the case. You may also need to retain every possible piece of evidence, including texts, calls, emails, and letters, in order to help build a winning case.

A contract is a type of binding agreement that can be enforced. Unlike a more general agreement, a contract will be much more specific in how it identifies each party’s duties and obligations will be fulfilled and, if need be, remedies for lack of performance of the contract. While a contract need not cover every term of the agreement to be binding, it must create sufficient mutual obligations between private parties that are enforceable by the law.

For a contract to be considered a valid contract, there must be mutual assent, an expressed offer and acceptance, and adequate consideration.

It is crucial to keep in mind that an agreement and a contract are two very different terms that should not be confused or used interchangeably. One helpful way to remember the difference is to think of the term agreement as a general term with no legal ramifications. Meanwhile, a contract is a type of agreement that has significant, binding legal ramifications. Two parties can come to an agreement or a meeting of the minds. However, without a contract to legally bind the two parties to fulfill their duties and obligations, an agreement is nothing more than a mutual understanding that cannot be enforced. A contract, however, is enforceable.

A contract is a type of agreement. However, not every agreement is a contract.

For example, if you and your friend mutually decide to grab drinks together after work, the two of you are in agreement. Both parties have come to a mutual understanding or meeting of the minds to consume beverages after work. This is an agreement. However, it is not a contract because neither party is legally obligated to grab drinks. If your friend decides to skip drinks after the fact of the agreement, while demoralizing, is not something that can be litigated successfully in a court of law.

This essentially lays out what information or data will be kept secret and confidential.

A good NDA will define what information is confidential and describe what situations will cause certain information to no longer be considered a secret. For example, a standard clause in many NDAs is that publicly released information will no longer be considered confidential.

NDAs always layout the receiving parties’ obligations to secrecy. Usually, this includes specific prescriptive recommendations such as destroying information after it is no longer needed (i.e., shredding papers) or not storing digital information on unapproved devices.

Well written NDAs will include a period for which the information will remain confidential. This timeline of secrecy could be for perpetuity or until some other trigger, such as a public announcement, is met.

No fair contract is complete without all the standard contract clauses and language designed to reduce legal risks and exposure.

Most businesses jealously guard information related to the development and production of their products. That’s because disclosing their products could result in competitors overcoming the company’s competitive advantage and breaking their revenue streams. As a result, a non-disclosure agreement may be used if a specific organization’s product is being discussed with outside parties.

Business negotiations can be fraught with potential trade secret or patent infringement risks. For example, an airplane manufacturer negotiating a deal with part suppliers will want to ensure that the vendor partner does not intentionally or unintentionally share secrets about their aircraft design to a competitor. Even if the negotiations do not result in a long-term relationship, the airplane manufacturer will want to enter into a non disclosure agreement to prevent suppliers from spilling their secrets.

In the modern era, information is king. Many businesses participate in the knowledge economy where what you know, and data, can be even more valuable than what you produce. As a result, organizations should always take special care to protect their priceless and efficiently transmittable knowledge using a non-disclosure agreement. Some companies often, for example, ask employees to sign a non disclosure agreement to protect proprietary business information.

There are many situations in which sensitive data may need to be presented to partners or investors in an organization. This can include board meetings, shareholder calls, or any number of acts of information sharing. While sharing crucial information is necessary for the running of a company, these data transference events can also result in the leaking of sensitive information. A Non-Disclosure Agreement helps to tighten up information security by legally obligating attendants of presentation and meetings to maintain secrecy.

Most enterprises must often rely on the performance of service contracts by partner companies and third-party vendors to do business. For example, a marketing agency may hire freelance graphic designers to help produce an advertising campaign for a Fortune 500 corporation. The corporation will most likely require the marketing agency to sign a Non Disclosure Agreement to protect its product before launching their marketing campaign. Likewise, the marketing agency will need freelancers to sign an NDA to ensure that disclosures on their end are also kept to a minimum during their services’ performance.

A verbal agreement remains a popular method of establishing and facilitating an exchange of obligations between parties.

Generally, whether a verbal agreement establishes a valid transaction depends on the level of trust between parties, the value of the goods or services in question, and the clarity of expectations of each party.

For example, a homeowner who is close friends with a contractor may engage in a verbal agreement with the contractor to repair a broken fence in return for a beer. As long as the services are delivered per the agreement, the verbal agreement may be considered a legally binding contract.

Furthermore, because of the existing trust between the parties and the relatively low value of services rendered, a verbal agreement may likely be what is appropriate in this situation. There may be no need to draft a written contract between friends to facilitate the exchange of contractor services for a beer.

While a verbal contract (or verbal agreement) is often sealed with a physical handshake, that does not always have to be the case. As long as a so-called “meeting of the minds” has occurred, along with other elements of a traditional contract, such as an accepted offer and an exchange of consideration, then a verbal agreement may be considered done. As long as the preconditions have been met, the “deal” is considered agreed upon. It can be sealed with a handshake, a verbal agreement, a toast, or any number of other forms of communication.

A verbal agreement may come in many forms (such as a discussion with words, an email exchange, or voice recordings, or even a handshake). But, the commonality is that the agreement is not in a written contract form.

The difficulty with a verbal agreement becomes painfully obvious in the event of a disagreement or conflict.

Contract law may differ from one region or state to another. In Texas, a verbal agreement or handshake contract can be legally binding depending on the facts.

However, it is imperative to note that while a verbal contract may be legally binding, it falls on each party to prove the existence through facts of a verbal contract in the event of a disagreement. This is where things can get messy.

The essential preconditions of a legally binding verbal contract (or verbal agreement) are as follows:

• An offer is made.
• An offer is accepted.
• There is a “meeting of minds” between all parties involved.
• An exchange of value, or consideration, occurs.

If these four conditions are met, the verbal contract or verbal agreement can be considered legally binding.

It is also important to know that while a verbal contract may be considered to be legally binding in Texas, not all oral contracts are legal. Under Texas law, the Statute of Frauds lays out a list of agreements that can only be considered legal if made in writing.

Contracts that must be in writing in Texas include:

• Agreements for the sale or transfer of real estate or land.
• The leasing or commissioning of oil and gas drilling operations.
• Copyright agreements.
• Any agreement where the terms may outlast the life of a party.
• Any agreement that will take longer than one year to perform.
• Any agreement worth more than $500.
• Marriages and divorces.
• Surety contracts (agreements to pay another person’s debts).

As you can see, the Texas Statute of Frauds covers a lot of ground. In the business world, many if not most agreements will likely need to be written.

A verbal contract has many inherent weaknesses compared to a well-written formal written contract.

A verbal contract:

• Lacks clear and concise documentation of duties and responsibilities.
• Has no spelled out remedies for breach of contract.
• Requires careful documentation of communications to establish proof of existence.
• Risks the parties not having fully thought through and discussed all the important details and the tougher points of the parties’ intentions.
• Is not considered legally binding for agreements listed under the Texas Statute of Frauds.

The precise line between when to make a handshake agreement (or verbal contract) or enter into a more formal contractual relationship backed by a written contract can be difficult to ascertain. However, in general, it is better to err on the side of caution and have a written contract.

If there is a lack of trust between parties, or a lack of history, a written contract is recommended. In other words, if you don’t think or aren’t sure that another party will deliver their end of a bargain as agreed upon, chances are you will want a written legally binding contract.

Likewise, if an agreement is worth a lot of money, it is also important to protect all parties and the integrity of the transaction with a written contract, which clearly outlines and spells out the terms of the agreement. In both these cases, you should not depend on a verbal contract.

If you do choose to engage in a verbal contract with another party, it is important to maintain thorough written records of communications and facts that can be used to demonstrate a verbal agreement was made. This can include text messages, emails, and phone call logs.

This type of documentation goes both ways. If you do not want to be held liable for breach of contract, you should not agree to anyone or anything, verbally or through any other forms of communication, such as email.

When it comes to a verbal agreement, you should watch out for signs of Affinity Fraud.

Affinity fraud is an all too common type of investment fraud in which one party tries to convince another party to make a financial investment without proper legal documentation in the form of a written contract.

Typically, the scammer is someone the victim trusts or shares a common identity group with, such as a common heritage, religion, or family roots.

Fraudsters will leverage their trust or even lean on the supposed existence of a verbal agreement to pressure victims to make financial payments. To avoid future confusion or falling victim to affinity fraud, it is crucial to take the role of a written contract seriously. This is especially true when the reputation or finances of your business are at risk.

For business transactions, we recommend employing a written contract drafted by a contract lawyer. This will be the best form of protection and peace of mind from future confusion, conflict, litigation, or fraud.

The only legally permissible and sufficient signature must include the name and title of an authorized signatory, the full legal name of the company, and the company’s DBA.

For example, a legally sufficient signature may look like:

John Doe, CEO, Company ABC doing business as Corporation 123.

It is essential to list your company’s legal name in the signature to ensure that you are signing on behalf of the company and not in an individual capacity. Furthermore, a DBA alone is not considered to be a sufficient signature.

Referring to a business by its DBA in a contract is a great way to reduce confusion and make the contract more readable. However, it is extremely vital to always first introduce all parties involved initially by their legal names.

Well-written agreements where a party wishes to use a DBA will first employ a Doing Business As statement when introducing each party involved in the contract in one of the opening paragraphs. For example, you might write, “Company ABC hereby referred to as Corporation 123”. Including a written statement definitively connecting the legal name of an entity with the name it is operating under will help prevent any confusion and potential contract disputes.

The contract must introduce the parties by their full legal names in the opening paragraphs, and signatures must also be signed with each party’s full legal name.

However, when it comes to the contract’s body text, a DBA or alias is perfectly acceptable.

Tax documents are tied to a person’s or employer’s legal name and identification. Distinguishing between your legal name and DBA for payments will make bank transactions and tax reporting to the IRS much more seamless. Both the bank and the IRS will attempt to match payments with a person or company’s legal identification.

Failure to specify or clearly connect financial transactions with a legal name could result in delayed payments or an IRS audit.

If you or your business want to operate under a different name than your legal name, you must register the new name (DBA) with the proper local and state authorities.

In Texas, sole proprietors, corporations, limited liability companies (LLCs), limited partnerships (LPs), and limited liability partnerships (LLPs) seeking a DBA must typically file for a DBA with the County where they conduct business.

To get to the bottom of whether or not text messages may constitute a legal document or a legally enforceable contract, it is important to understand the basics of what a contract is.

A contract is an agreement that creates legally enforceable obligations between two or more parties. Failure to perform or carry out the duties and obligations specified in a contract results in a breach of contract that must be legally remedied. Remedies for a breach of contract include, for example, general damages, consequential damages, reliance damages, and specific performance. In general, an aggrieved party may sue to enforce the contract, obtain monetary damages, or secure other remedies.

Remember, the essential preconditions of a legally binding contractual agreement are as follows:

• An offer is made.
• An offer is accepted.
• There is a “meeting of minds” between the parties involved.
• An exchange of value, or consideration, occurs.

If these four conditions are met, then a contract can be considered to be legally binding. This means that with the right language, and certain actions by the parties, a chain of text messages may also become a legally binding contract.

Examples of elements found in text messages that could be treated as legal documentation or even a legally binding contract include:

• Checking an agreement box (Clear assent)
• Replying “Yes” (Clear assent)
• Replying with an affirmative (Clear assent)
• Replying “I Agree” (Clear assent)
• Clicking a form link that leads to an accepted method of assent (Clear assent)
• Providing an E-signature via SMS (Clear assent)
• A text message containing term language (Actual notice)
• A text message with a link to terms of service (Actual notice)
• Text indicating contractual obligations (Actual notice)

Now that we know some text conversations can be treated similarly to written documents, it is important to think twice before texting during business negotiations. Remember, if the text conversation contains all the contract elements (offer, acceptance, consideration, and legality).

To ensure that your text messages will not be construed as a legal contract or contract document, it is important to include qualifying language. An example of a qualifying language is: “…subject to a fully executed contract”.

Because text message conversations can be used as evidence that a contract exists or that a contract has been breached, it is important to save and back up all of your messages.

When engaging in a business deal or transaction, it is important to treat texts as potential legal evidence and documentation, no matter how casual. That means to compose your texts carefully, with clear language and no room for doubt.

Unintentionally entering into or creating a contract via SMS can have potentially damaging consequences. To reduce any legal liabilities and create ironclad contracts that are enforceable, it is advisable to seek contract experts, such as a contract lawyer.