28
Nov

The Formation of a Contract without both Party’s Signature.

Often times, a binding contract is formed even when all of the parties involved do not sign the written contract. One party may “jump the gun” and start performing before the other party(s) sign the document or one party may sign the contract but the other party does not, and both parties start performing. In circumstances like these, it is important to know your rights and obligations when one party seeks to enforce the terms of the written contract even though not all parties signed it.

A situation where one party signed the contract and the other did not arose in Lease America. Org, Inc. v. Rowe International Corp, in the First Circuit Court of the United States. America’s president signed the contract but next to his signature he wrote, “(with conditions)”. Both parties began working together until a few years later, a dispute arose between them and America attempted to sue Rowe in a Massachusetts court based on the terms of the contract. Rowe motioned for the case to be removed to Michigan pursuant to the choice of law clause in the contract. America then objected to the removal based on the fact that the terms were not binding (since both parties did not sign the contract) and that by America writing “(with conditions”), the signature was simply a counter offer.

For there to be a contract, written or oral, there must be: (1) an offer (2) acceptance (3) and consideration. An offer is just that, offering to do something or refraining from something. The Offeree, the one receiving the offer, typically must agree to the exact terms of the offer. Under most circumstances, if the Offeree changes or adds terms, it is considered a counter-offer. Generally, consideration means that one party must be giving something to get something, no matter how small. The issue in the case above was whether America accepted the terms of the offer from Rowe or actually made a counter-offer by writing “(with conditions”) next to his signature.

In this case, the court held that there was a valid written contract between the two parties even though Rowe never signed it. The court reasoned that although both parties did not sign the contract, it was clear from the record that both parties manifested an acceptance to the agreement. This case offers a great example about the formations of valid contracts and how a party may become bound to a contract even if the party did not sign it. One of the most important factors when deciding whether there is a valid contract is the dealings of the parties. The more time that the parties conduct business pursuant to the terms of the contract, the more likely a court will find that a valid written contract exists.
It is important to obtain legal contractual device from an attorney with experience litigating contractual disputes. If you have any questions about contract formation or are wondering whether you are bound to a contract even though you did not sign your name to a piece of paper, fell free to contact our office.

See also: http://www.lexology.com/library/detail.aspx?g=4642a123-c032-4c81-b8e5-5bf419e1f790&utm_source=lexology+daily+newsfeed&utm_medium=html+email+-+body+-+general+section&utm_campaign=aba+rptel+subscriber+daily+feed&utm_content=lexology+daily+newsfeed+2015-11-23&utm_term=