What’s in a comma? A lot of zeroes, sometimes — Law 204/704 developer Peter Kissick joins us to talk about a legendary case involving a comma, utility poles and $2.1 million dollars. That’s a gateway to a broader conversation about contracts: what they are, how they work, and what most of us are getting absolutely wrong.
Contracts govern many aspects of our day-to-day lives—they are one of the fundamental ways that society is ordered. You likely engage in dozens of activities governed by contract every day, usually without considering the legal relationships you are entering into and engaging in.
At its most fundamental level, a contract is an agreement that will be enforced because it represents the communication of a commitment to engage in a reciprocal measured exchange – in other words, the exchange of valuable promises that in turn create obligations to do or not do something.
Communication and exchange are central to the formation of a contract. For a contract to be formed there must be offer and acceptance, and there must be consideration (something of value must be exchanged… contracts are not the same as gratuitous promises, where one of the parties receives no benefit of value).
While there are many more rules that relate to when and how contracts are formed this basic definition can help us understand when we might enter into a contract.
In this post we will discuss some everyday activities you likely engage in, and their contractual nature.
We can consider a few examples from my day today:
The first thing I did when I woke up was to check my phone and respond to emails. I have a contract with my phone company—in consideration for me paying a certain fee every month, they provided me with a phone, as well as with access to their cell towers. I accepted this offer when I signed my phone contract and began using their service.
When I checked my email account, I was in a contractual relationship with Google. When I send or receive content through a Google Service I give Google and its affiliates a worldwide license to use that content for certain purposes, per the Google Terms of Service. As consideration for those licences, Google provides me with access to its Services. Google offers these services publicly and I enter into a contract by creating an account and agreeing to the Google Terms of Service.
Dealing with email is hungry work, so I decided to grab breakfast at a campus coffee shop. I ordered a bagel and a large tea. The cashier told me that the total would be $5.05, which I paid in cash. Two minutes later I was handed a bagel and a large tea.
When I handed the cashier the money, I entered into a contract with the coffee shop. As consideration for a bagel and a large tea, I provided $5.05. I communicated my acceptance of their posted offer to provide tea and a bagel for $5.05 by ordering from the cashier and providing money. They fulfilled the terms of the contract by providing me with my food and beverage.
As you’ve seen, contracts have already been a part of just the very beginning of my day. Take a minute to think about your day so far: what have you done that has involved an offer, acceptance, and consideration? How many contracts have been involved with in the past hour? Can you think of one or more contracts that are allowing you to read these worlds right now?
Contracts are central to the ordering, not only of big businesses, but our everyday lives.
– Isabelle Crew
It’s a word that is both ubiquitous (sports fans hear nightly about athletes’ multi-million dollar contracts) and for some, scary or intimidating (he needs me to sign a contract about that!). It may be one of the most misunderstood words in the legal lexicon. Let’s consider some myths and misconceptions about contracts.
If it’s not written down, it’s not a contract. False! A contract arises when two people, or two companies (or combinations of both) promise to do something for the other. Like the cable company promising to provide you with Internet service, and you in return promising to pay for such services. Thing is, it is the pair of promises that are generally the only requirement for there to be a contract – and those promises can be written, oral, or even implied by the context! So the writing doesn’t make the contract, the promises do.
OK, but it’s MORE of a contract if it’s written down, right? If the contract is written down, it doesn’t necessarily have more legal weight, but it is a whole lot easier to enforce. Furthermore, it’s a lot easier to determine if you – or the other party – are living up to your obligations if there is a written record to reference.
So do those promises then have to be of equal value; does the contract does have to be fair? Nope. I said earlier that all we needed for a contract was a pair of promises; I didn’t say that exchange had to be a good deal for both people. Fairness, like beauty, can be in the eye of the beholder. Courts don’t examine what is, or is not, a good or fair deal (absent something nasty, say, like fraud). So beware of one-sided contracts – they are still enforceable.
You mean like my cell phone contract, or those annoying “pop ups” whenever I download a new app or operating system? Yes, those. They are called “standard form contracts” and generally they are written to protect the provider of a service (the cell phone provider) from liability. While they may seem a bit one-sided, they do help keep the costs of those services lower for consumers.
Does anybody actually read those agreements? I just click “I accept” so I can get on with life. They aren’t really enforceable against me, are they? Well, why did you click “I accept” if you weren’t accepting the terms of the contract? It’s really no different than signing a contract you didn’t read. Think of that mouse click as being the same as an autograph. You might want to read some of those terms that you’re agreeing to…
So contracts are nothing more than tools big companies use to intimidate consumers? We have been talking about one type of common contract – the standard form contract – but contracts are incredibly useful tools to enhance and protect relationships, especially for small and start-up businesses. They clarify relations, protect expectations and keep people from fighting. And you can learn more about the uses of contracts in LAW 204, Corporate Law!