It's always a good idea to get a business agreement down on paper, but sometimes, for one reason or another, it doesn't happen. Most businesspeople in Colorado are familiar with the so-called handshake deal, and other types of contracts that are not necessarily in writing. Many of these agreements meet the basic requirements of a contract (offer, acceptance, consideration, competency, intent) and so will be legally enforceable. However, a law known as the Statute of Frauds requires that certain types of contracts must be in writing, or else they are not legally enforceable.
Every state has some version of the Statute of Frauds on its books. In fact, the basic premise of the law dates back to English law from before the American Revolution. Contracts that must be in writing include those that are to last for more than one year, contracts involving the executor of an estate, contracts for goods that cost more than $500 and contracts for the sale of land, and financing agreements.
The Statute of Frauds often comes up in contracts that are related to real estate. For example, large construction projects often take more than a year to complete. Therefore, the Statute of Frauds requires contracts for these projects be preserved in writing. Construction projects are expensive and often involve financing agreements, which must be in writing as well.
If all goes well, everyone performs their expected duties and everyone's happy, then of course questions over the presence or absence of a written contract will not come up. It's only when something goes wrong that the absence of a written contract becomes an issue. If that happens and a business is not prepared for it, the business may not be able to get a court to enforce the contract. The result can be disaster for the business.
An attorney with experience in contract law can help business owners, investors and others to understand their options, negotiate and draft better contracts, and resolve disputes when they arise.