Contracts In Everyday Life

By: H. Stanley Harris

Most people encounter contracts in their everyday lives on practically a daily basis. Anytime
one goes to a store to make a purchase, gets treatment from their doctor, or even borrows a book
from a lending library involves a contract of some sort. The often quoted definition of a contract
is “a promise, or set of promises, for breach of which the law gives a remedy, or the performance
of which the law in some way recognizes a duty.” However, the vast majority of persons
entering into or dealing with contracts never give much thought to the legal ramifications of a
contract until one party breaches the agreement.

The generally accepted elements of a contact include an offer, an acceptance, and consideration
given by the parties. Consideration can take many forms such as promises to perform some act,
the payment of some amount of money, or the doing of something that the person is not already
legally bound to do.

In everyday life, most people come into contact with a contract situation when that person agrees
with another person, firm, or entity to perform some service for the first person in exchange for
money. Examples would be the tune up of a person’s car engine, the painting of one’s house, or
the installation of certain equipment in one’s home by another person. These contracts can be
either written or oral in nature, and do not usually result in any material disagreement between
the two parties to the contract. However, in order to more adequately and efficiently prove the
terms and conditions of a contract, one should get a written and signed document from the other
party to the contract setting out the terms, conditions, and mutual obligations of each of the
parties to the contract.

As an example, assume that a homeowner wanted certain audio and lighting equipment installed
in his home, and hired another person to perform that service in exchange for certain funds. The
preferable way to enter into a contract between those parties would be to reduce the agreement
between the parties to writing to include terms such as what equipment was to be installed, what
services were to be performed, the time parameters for the completion of the installation of the
equipment, the schedule of payment for the equipment and services, the location of the premises
in which the equipment is to be installed, and the date of the agreement together with the names,
addresses, and telephone numbers of each of the parties entering into the contract. Said contract
should be signed by both parties, and, if one of the parties is a corporation or some other legal
entity, the contract should be signed by someone in authority for the corporation or other entity.

Where most individuals encounter problems with these types of everyday contracts is when
funds are paid for the performance of obligations or other duties under the contract prior to the
duties and obligations having been fully completed. Many times, a workman will require some
of the contractual funds up front at the signing of the contract in order to purchase certain
equipment to be installed pursuant to the contract. However, disagreements often arise when
money is paid in such a manner, but the equipment or products are not purchased or provided
that the funds paid were supposed to procure. In this instance, always get a receipt for any funds
paid, and make note on the receipt for what the funds are to be used. In the alternative, if
applicable, one could go out and purchase the equipment or products himself that are to be used
in the project so that the homeowner will be in possession of the products purchased instead of
the workman or installer. The balance of the payment under the contract should be reserved until
such time as the work is completely finished and accepted by the homeowner at which time the
homeowner will be obligated to pay over to the workman the entire balance of the contractual
price. No matter how the contractual price is paid, always get signed receipts from the recipient
for any and all monies paid pursuant to the contract with the receipts explaining on the face of
same what the funds are paying for pursuant to the contract. If for some reason the workman or
installer does not finish the job for which he is contracted to perform, the homeowner is not out a
great deal of money, and, hopefully, the only money spent by the homeowner is for the product
or equipment that he bought to be installed.

If the workman or installer does breach the contract by not performing the duties agreed to be
performed under the contract, the homeowner would have adequate documentation of the
contract, what’s been paid by the homeowner, and would also have evidence of the installer’s
lack of performance under the contract which can be easily proved by oral testimony and
pictorial evidence of the unfinished work. However, if the homeowner has paid all of the monies
due to the installer prior to the work being completed, the homeowner will be hard pressed to
procure a judgment against the installer unless the homeowner has adequate proof of the actual
contract and breach by the installer. Even if the installer gives the homeowner a discount for the
work to be performed if the homeowner pays the installer in cash, always get a receipt for the
payment of any cash or other funds with said receipt signed by the installer with a notation on the
receipt for what the funds are being paid.

It is much easier, less time consuming, and much less costly to a homeowner to enforce a
contract against a workman if there is proper evidence of the contract as well as proper
documentation as to what has been paid by the homeowner to the workman pursuant to the
contract. It would be much harder for the homeowner to get funds out of a contractor that have
already been paid to him rather than to show the contractor has breached the agreement while the
homeowner still has the funds in his possession. Additionally, contractors, workman, and
installers many times are difficult to find once a breach has occurred, difficult to serve with legal
process if a lawsuit is required to enforce the contract, and very hard to collect from if the
homeowner gets a money judgment against the contractor to whom funds have already been paid
prior to the contract being fully executed by the contractor.

Therefore, always deal with other parties in contractual situations as if you expect the other party
to breach the contract. If you document the contract properly as above described, your
experience to enforce the contract will be much less costly and obtrusive than if you fail to
properly document your contractual dealings with other persons. The old saying that, “if a
person is willing to enter into a contract with you, then he should be willing to put all dealings in
writing” is very good advice to follow.