Contract or Hand shake? 4

[davidinindy]

I think I know what the overwhelming repsonse to this will be, but figure'd I sk anyway.
I am going to work on contract for a small-town company 3 miles down the road. The owner is just a "good ol' boy".
I asked him if he had a standard contract form, or if I should supply it.
He seemed offended slightly, and said his other contract guy is just working on a handshake.
I really think he's an honest guy, and will pay me what we agree to, but have had bosses back out of things they promised me verbally in the past.
Would I come across as a hardazz if I forced him to sign a contract? Would it affect the trust factor right from the start? My contract is pretty long and drawn out with many things that really don't mean much to this position. Should I come up with a simplified version so as not to overwhelm him?
I want the job, but don't want to come off as untrusting or anal.
Anyone else working on a "handshake"?

David

 

[flamby]

A contract is a legal document and in case of legalities "a much less formal agreement" will be of little help if at all. Insist on a completely legal contract with complete verbosity and explain it to your good guy that contracts are for gentlemen, not cons. Personally, If I could not muster this much courage to ask for complete agreement, I will work on a handshake.

Ciao.

 

[RDK]

A contract is an agreement entered into by two parties. It has five characteristics to be a legally binding contract.

They are

Offer
Acceptance
Intent
Capacity
Consideration

An offer is you offering to do some work for a set fee, acceptance is the other party agreeing to do so, intent means that both parties must have the intent to enter into a contract, capacity refers to the legal capacity to enter a contract. Companies have the capacity as do individuals, children in some circumstance do not have the capacity to enter into a contract. Consideration is that the contract must be for the exchange of something of value. It can be one dollar.

When you go to the corner store to buy a pack of gum, the placing of items on display is the legal equal of an offer to enter into negotiations for the gum at the stated price. Your taking the gum and putting the money on the counter is your offer to purchase, the clerks taking of the money is the acceptance, the gum and the money are the consideration, intent is obvious by the actions. The corner store is most likely a company and has given the clerk the apparent authority to enter into this contract so the capacity requirement is fulfilled.

Thus you have entered into and executed a contract to transfer title and ownership of the gum.

Notice that this transaction was not only not written but not even verbal. Any court in the common law world would uphold the transfer of the property.

Thus contracts do not have to be written or formal or even verbal to be binding. They can be inferred by the actions of the parties involved. The only reason for a written contract is to make the terms clear and unambiguous as possible. The written word will not fade with memory nor will it be a matter of determining what was said. Just as would a reply letter saying that the terms were not as stated but were something else. The court would look at the two documents together as proof of the terms of the contract.

If you have verbal negotiations on terms of employment and then follow the discussion up with a letter outlining your understanding of the agreement it is not the letter that is the binding contract. The verbal contract is the binding contract, all the letter does is serve as proof that the verbal contract exists and what these terms are. By following some or all of the terms as outlined in the letter then both parties have demonstrated that the letter represents the agreement and any court would find that the contract terms were as per the terms of the letter.

If the contract was silent of some issues then the court would apply one of two methods to determine the terms. There may be statutory laws that govern the interpretation of the contract. Thus you could refuse to be paid in pennies since there is a legal limit to the number of pennies that construe legal tender.

The court could take into account typical practices in the business sector or geographic area. Thus in construction where a day is often 10 hours long the court could rule that your daily rate meant 10 hours work rather than 7.5.

Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[wes616]

In many states there are "oral contract" clauses. Harder to prove, but are still legally binding.

Something I've encounter recently is the idea of an email based contract. If your new customer is online, just send him a quick email regarding the terms discusses (just to be clear) and hopefully he'll email you back a "yes" email, and Walah... Contract.

good luck

Wes C.
------------------------------
In this house, we OBEY the laws of thermodynamics! - Homer Simpson

 

[RDK]

You are missing the point.

The contract exists when all five conditions are satisfied: Offer, acceptance, consideration, capacity and intent. An offer has to be accepted by two parties with the capacity to enter into a contract, the intent to enter into a contract and the agreement has to be for some sort of consideration i.e. the exchange of value.

The contract exists the instant that the offer is accepted.

The location where the acceptance is made establishes the jurisdiction of the contract. There are special and established rules for acceptance by mail, by phone and now I imagine by e-mail for contracts made across different jurisdictions.

In the case of companies making contracts there are rules of who has the authority and even apparent authority. (Basically if I as an employee of a company hold out that I have the authority to enter into a contract then the other party can rely on my apparent authority to enter into a contract. Thus if you allow an employee to enter into one contract and honour it then you would have difficulty denying that he or she did not have the authority to enter into a second similar contract.)

The agreement does not even have to be verbal. The existence of a contract can be inferred by the actions of the parties and normal trade custom.

The example of buying gum in a store is one example of a contract that is inferred by the actions of the parties.

If A told B that he would sell his brand new BMW for one dollar and B accepted then the only question the judge would have would be if A has any more cars at that great price. The verbal contract would be legally binding (once its existence was established, witnesses or A accepting the dollar and passing the keys and registration would be proof of the contract.)

There is no need for a written contract, an e-mail contract or anything else for a legally binding contract to exist. (The only exceptions to this are if there is some statute requiring that that sort of contract be in writing. Locally a real estate transfer contract has to be in writing.)

All the e-mail or letter does is help to establish the existence and the terms of that contract.

If you send a letter and it is not acknowledged they you may still have to prove that letter was actually sent. Registered mail only proves that you sent something on that date.

E-mail being electronic usually have header information imbedded in them and leave a log as they pass through some systems.

The best is a paper signed by both parties that outlines the terms. Second best is an exchange of letters with the terms outlined in one and these terms being accepted by the other party.


Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[mapelCE]

In direct response to davidinidny's inquiry, I think Crossfire has nailed it on the head.

If you're doing business as a P.E., at least in California, you will have a written contract. It's required by the Professional Engineer's Act. I found it interesting this year to see how often this is enforced when the Board sent out their annual disciplinary action summary. They even tell you exactly what needs to be stated in the contract.

 

[davidinindy]

Well, I'm not a PE... I just play one on...well, nevermind. We're putting together a contract.

David

 

[RDK]

Interesting, the only requirement from the California written requirements that I am missing on my standard contract is my license number.

I also include language on dispute resolution and limits of liability.

If anyone is interested here is my generic terms and conditions. I simply fill in the relevant information as required. Often the scope of the services and fee schedule is simply as outlined in the proposal and is included by reference.



Terms of Engagement

Definitions

Consultant:

Client:


Project:




Scope of Services:



Schedule of Fees and Disbursements:



General

The consultant shall render the Services as specified in the above Scope of Services, to the Client for this Project in accordance with the following terms of engagement. The Consultant may at its sole discretion or at any stage engage subconsultants to perform any part of the Services.
Compensation

This work shall be subject to a daily rate. All charges are payable in Canadian Dollars. Invoices are due and payable by the Client within thirty (30) days of the invoice date. Overdue accounts shall be subject to a 2% per month interest fee. Monthly progress claims will be submitted.

Representatives

Each party shall designate a representative who is authorized to act on behalf of that party and receive notices under this agreement. Kitson Engineering designates R.D.Kitson MBA, P.Eng as its representative.

Termination

Either party may terminate this agreement upon thirty (30) days written notice in writing. On termination by either party, the Client shall forthwith pay to the Consultant all charges for Services performed, including all disbursements and other charges incurred by the Consultant.

If either party breaches this engagement, the non-defaulting party may terminate this agreement after giving seven (7) days notice to remedy the breach. On termination by the Consultant under this paragraph, the client shall forthwith pay to the Consultant its charges for the Services performed to the date of termination, including all fees and charges for this Project.



Environmental

The Consultants field investigation, laboratory testing and engineering recommendations will not address or evaluate pollution of soil or polluted groundwater. The Consultant will cooperate with the Client’s environmental consultant as required.

Professional Responsibility

In performing the services, the consultant will provide and exercise the standard of care, skill and diligence required by customarily accepted professional practices and procedures normally provided in the performance of the Services contemplated in this engagement at the time when and the location in which the services were performed.

Limitation of Liability

The Consultant shall not be responsible for:
(a) The failure of a contractor, retained by the Client, to perform the work required in the Project in accordance with the applicable contract documents.
(b) The design of or defects in equipment supplied or provided by the Client for incorporation into the Project.
(c) Any cross- contamination resulting from subsurface investigations.
(d) Any damage to subsurface utilities and structures, which were identified and located by the Client.
(e) Any Project decisions made by the Client if the decisions were made without the advice of the Consultant or contrary or inconsistent with the Consultant’s advice.
(f) Any consequential loss, injury or damages suffered by the Client, including but not limited to loss of use, earnings and business interruption.
(g) The unauthorized distribution of any confidential document or report prepared by or on behalf of the Consultant for the exclusive use of the Client.
(h) Any loss or damage to any third party.

The total amount of all claims the Client may have against the Consultant under this engagement, including but not limited to claims for negligence misrepresentation and breach of contract, shall be strictly limited to the amount of professional liability insurance the Consultant may have at such times as the claims are made.

No claim shall be brought against the Consultant in contract or tort more than two (2) years after the Services were completed or terminated under this engagement.
Documents

All of the documents prepared by the Consultant or on behalf of the Consultant in conjunction with the Project are instruments of service for the execution of the Project. The consultant retains the property and copyright in these documents, whether the project is executed or not. These documents may not be used in conjunction with any other project without the prior agreement of the Consultant.

Field Services

Where applicable, field services recommended are the minimum necessary, in the sole discretion of the Consultant, to observe whether the work of a contractor retained by the Client is being carried out in general conformity with the contract documents. Any reduction in the level of services recommended will result in the Consultant providing a qualified opinion as to the performance of the contractor.

Dispute Resolution

If requested in writing by either the Client or the Consultant, the Client and the Consultant shall attempt to resolve any dispute between them arising out of or in conjunction with this agreement by entering into structured non-binding negotiations with the assistance of a mediator on a without prejudice basis. The mediator shall be appointed by agreement of both parties. If the dispute cannot be settled within 30 calendar days binding arbitration under the rules of the Arbitration and Mediation Institute of Manitoba shall be used. One arbitrator shall be chosen by mutual agreement of the parties, failing agreement on an arbitrator one shall be chosen by lot from a list of three to be provided by the Arbitration and Mediation Institute of Manitoba.

Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[CarlPugh]

Everyone has beat around the bush, but no one has stated the obvious.
What is the risk if you don't have a contract.
Do you get paid after 8 hours work, after 40 or when the job is completed?
What is your liability, can you be sued and lose everything?

The extent of a contract should depend on the risk involved.

If you get paid after 8 hours and there is no risk, then a handshake is OK. (Unless a written contract is required by law)

For a $1,000,000.00 contract every t should be crossed and every i should be dotted.

 

[RDK]

Again the point is missed.

There is a contract. A verbal contract is every bit as binding as a written contract. The only problem is proving what the terms of the contract are. The only exception is if there is some legal requirement for some types of contracts to be in writing. In Manitoba and Saskatchewan there is a legal requirement to have contracts for the transfer of real estate in writing.

If you offer to work for 40 hours the other party accepts and you have the intention and capacity then the consideration exchanged is the time and money all the requirements of the contract have been fulfilled.


The risk of doing this without having the terms of the contract recorded in writing are that you may not get paid.

You may not get paid your contract rate. The other guy says that the rate was $50 per hour and you had discussed $100. You say the rate included travel time as compensated time the other guy says that you had agreed to travel on your own time. Meals and living expenses could also be disagreed upon. If you go to court then it is a matter of who will be believed.

You may be sued because something went wrong and the other party is claiming that this was in your scope of work and you missed it and are therefore liable. (Doesn’t matter if it is your fault or not, the other side could claim that you were hired to make sure that whatever went wrong did not happen again it is who is believable.)

Your liability could be unlimited and be the actual damages suffered by the other party. This would not only be direct but indirect damages such as loss of business revenue and the lost profit by the building not being completed in time and occupied so that the new product could be on the market before the competitors and become the market standard.

Without a record of your contractual terms then it comes down to the judge deciding who is the most believable. If the other guy is willing to lie under oath and better yet if others in his company are also willing to lie under oath then you lose.

Without a contract requiring say arbitration they you will end up in court and have to pay a lot more in legal and court costs than you would have had there been a arbitration term in the contract.

Lots of people will lie under oath to save face; many more will lie under oath to save a million dollars. If the other guy gets hit by a bus then his company may decide that they don’t want to honour his agreement.

You may find yourself with a contract that was nothing near what you had discussed.

Not having your contract is writing is like not keeping your calculations on file. If everything goes well then this is simply extra paper that you have to store forever. If something goes wrong then it is the way to determine what was agreed upon (or calculated) and is the starting point for resolving any disputes.




Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[davidinindy]

Thanks everyone... We're hashing out some details, but will have a contract.
Is it very common for employers to take out taxes on contract emplyees vs. a 1099? They say they've done this ruitinely without a problem. They, in fact, say that the IRS prefers this. Actually, I've read that if it
s discovered that the contract employee didn't file his income, then the company may be responsible.
Going thru the IRS site, it appears to be legal, bit isn't what I'm used to.

David