Business Transactions:
$129* Tel. Consult
Starting A Business
Buying a Business
Exit a Bad Business
Stock-Asset Purchase Agt
Business Plans
Should I Incorporate?
S-Corp or LLC?
S-Corp or C-Corp?
Asset Protection
Get Tax ID Number (EIN)
Get a DBA
Get Seller's Permit
How to Set Up payroll
Statement Of Information
Sales Contracts
Purchase Orders
Unsigned Contracts
California Usury Law
Promissory Notes and Loans
Primer on Trade Secrets
Security Breach
When to Destroy Records Check Marked Paid In Full

---

Related Practice Areas:
Corporations
Employment Law
Internet-Computer Law
Landlord-Tenant
Limited Liability Company
Partnerships
Real Estate Law
Trademark & Copyright
Wills & Trusts

---

Prepared By: Melissa C. Marsh, Los Angeles Business Attorney
Written: April 2009

We have all heard that oral contracts can be valid and binding, and recently the High Court of Justice in Grant v. Bragg (Jan. 22 2009) has affirmed that an oral contract, and even an unsigned contract, can be binding if there is partial performance. Under the doctrine of part performance, the plaintiff can establish the existence of an oral contract through emails, text messages, and even mere post performance. Following an oral contract, if one of the parties begins to perform his or her end of the bargain, such acts may provide reliable evidence supporting the existence of an oral contract. This evidence may be bolstered by emails and text messages.

But what about unsigned contracts? Well, in Grant v. Bragg, the High Court found that a written unsigned contract was binding because the parties had acted as if the contract had been finalized. In Bragg, both Grant and Bragg had formed a company and entered into a buy-sell agreement (a.k.a. share agreement) pursuant to which either shareholder could buy out the other at a set price based on a formula in the event of a dispute. Needless to say, a dispute arose and Bragg offered to buy Grant's shares. Although a formal written contract was prepared by a law firm, neither party had signed it and both parties appeared to be continuing negotiations. However, the Court found that Bragg had already seized control of the company and that the email exchanges between the parties at the time were sufficient to bind them to the essential terms of the draft contract prepared by the law firm.

It is therefore important for parties engaged in contract negotiations to: (1) refrain from performing any work until a final written contract is prepared and executed; and (2) ensure that all pre-contract correspondence contains a statement that any deal is "subject to the execution of a signed written contract."

If your company routinely engages in long term, or multiple phase projects, that often require some advance, as is often the case in tech related projects, the parties should insist on the execution of a short letter agreement that clearly sets forth the terms of the limited scope of work to be performed in advance of a signed written agreement. Such a letter and all correspondence regarding the agreement should also reiterate the fact that the parties are not committing to the complete project's scope, regardless on any email correspondence to the contrary, until the parties execute a formal written contract addressing each phase of the project.

If you have any questions, or would like further information on contracts, please call 818-849-5206 or Email Us.

© 2009 Melissa C. Marsh. All Rights Reserved.