Is An Unsigned Contract Binding?

On June 5, 2010, in Small Business Law, by Luke Enno

In Minnesota, if you are looking to enforce an unsigned contract, you may have significant obstacles to enforcing such an agreement.  Generally speaking, I would conclude that an unsigned written contract (whether it is a partnership agreement, an employment contract, a subcontractor agreement, a buy-sell agreement or a lease) is unenforceable under the law.  However, this is NOT a hard and fast rule.  In every case, there are certain exceptions.

What are reasons that an unsigned contract might be enforceable?

1 – All of the parties to the contract have performed substantially in accordance with the terms of the unsigned contract (in other words, for some period of time, the parties’ actions indicated that indeed there was a contract and that the unsigned contract operated reflected the terms of that contract).

2 – At least one of the parties to the contract has performed substantially in accordance with the terms of the unsigned contract (in some cases, even if only one party’s actions indicate that indeed there was a contract, there is a possibility that a contract still existed and that the terms of the unsigned contract accurately reflect the terms of that agreement.)

3 – There was an offer, acceptance, and consideration exchanged.  These are the basic requirements of any contract, verbal or written.

What is the biggest challenge to enforcing an unsigned contract?

In Minnesota, the fact that the contract was not signed can significantly hurt the ability for that contract to be enforceable.  The parties merely have a verbal contract at best without a signed written contract.  Without a signed written contract, there is always the possibility that one or more of the parties will (a) deny the existence of any contract or (b) deny that the terms of the unsigned written contract are accurate.  It then becomes a question of fact and in a courtroom it can be very difficult for the party trying to demonstrate the existence of a contract to prove it.

What should I do if I have an unsigned contract?

If you have contracted with someone and the two of you have an unsigned written contract, as soon as possible, make sure to have that contract signed (and dated) by both parties.  Remember, if one party signs the contract but not the other party, it is as though the contract is unsigned.  Also, the contract needs all parties to sign in order to be considered enforceable as a written contract.  One other recommendation, if you have an unsigned written contract, it is usually a good idea to have an attorney review that contract before signing just to make sure the terms are in order.

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12 Responses to “Is An Unsigned Contract Binding?”

  1. Stephen says:

    I had a verbal contract with a marketing company in MN for insurace, that if I had any agent contract through them that I would receive over rides on the business the agent did. I have had this oral contract with them sense 2000 and have been receiving over rides on agents. One agent that I had to file a law suit against requested the marketing company remove him from my hierarchy, the marketing company has now removed him with out my permisson, can they do this? This oral contract has been in force for 12 years?

  2. Luke Enno says:

    Stephen, first things first. Thanks for contacting me with your question. I appreciate it. In answer to your question, it should be stated that many oral contracts are enforceable. There are particular oral contracts that actually are not enforceable as I’ve pointed out in various blog posts. Naturally, the challenge to enforce an oral contract is that it is so hard to tell what the terms of it are unless you follow the actions of the parties. Given that you have been under a verbal agreement for 12 years, there is a strong track history as to the parties’ actions.
    With that said, in answer to your question, here is what I would say: The marketing company may indeed be violating your agreement with them by what they did. What complicates this though is whether the agent has a contractual right with the marketing company to request removal from the hierarchy. It shouldn’t factor into your contract terms but on some level it could. If there has been an expressly stated understanding either via words or consistent actions that the marketing company does not remove an agent from your hierarchy without receiving your permission, then indeed the company is in violation of the contract with you. This can be further supported if other peers to you have a similar arrangement with the marketing company. If those other peers must also give consent before an agent may be removed, then it further proves what the marketing company’s policy is.
    The next tricky question to ask then is this: how much have you been damaged. It is one thing for someone to be in breach of contract. It is another thing to assess financial damages to that. We could go into a pretty deep analysis of that!

  3. Haley says:

    Hi Luke,
    I have a question regarding this post… So I am trying to buy a house. I put my offer in and we counteroffered back a forth a couple times. They put in the last counteroffer (unsigned) I accepted it and then signed.They verbally agreed that they were going to sign it and have it to my first thing in the morning. Over night, they got a better offer and then chose to go with that one. Is there anything I can do? I really wanted that house. :(

  4. Luke Enno says:

    Unfortunately, the issue here is that in general when it comes to certain types of agreements, those agreements must be in writing to be enforceable legally. The sale of real estate happens to be one of those types of agreements. In most (if not all) states the Statute of Frauds applies to the purchase of real estate. It mandates that for either party to enforce an agreement legally (in a courtroom), there has to be a mutually-signed writing to support any verbal agreement that the parties may have.

    Ethically and morally, what the seller did was wrong. Legally however, I don’t see a court having a way to enforce the seller’s verbal promises. You always have the right to raise an argument with the seller but I don’t see a seller changing course in an instance like what happened with you. I’ve been a part of many real estate transactions and I don’t assume that there is an agreement in place until both or all sides have actually placed their signature on the agreement. For future reference, you may want to insist on having that agreement in writing immediately or waiting until the seller signs first.

    It is always a good idea to speak with your local attorney who specializes in real estate law to obtain additional guidance as well.

  5. tamara says:

    I’m renting and I came into some financial hardships. Recently my husband came up with agreement to get my rent caught up, The landlord came over and said he would agree to the new agreement there was another party present. My husband forgot to have landlord sign the agreement. Can that other party be a witness on our behalf also can it be enforceable becasue we offered the landlord something in exchange that would be money over a period of time.

  6. Luke Enno says:

    This is a difficult question to answer unfortunately. Verbal agreements in certain contexts can be considered to be enforceable and in this context, it certainly could qualify as an enforceable agreement. However, verbal contracts are notoriously difficult to enforce as one might imagine – even if there is a third party witness who would be willing to verify what he or she heard communicated. Certainly, the other party could be a witness. I think though that the challenge of going to court to try and prove something like the existence of a verbal lease agreement is an uphill battle. Not having the landlord sign the lease frankly puts you in an unfavorable position. But if you decide it is worth tackling in court, I’d recommend it and bring that witness with you to at least give you the opportunity to allow the witness to collaborate your position. Some judges will place weight on a witness who appears to be credible.

  7. Stephanie says:

    I had planned on selling my trailer and wrote the following statement to the person planning on buying in fb message I want to know if they have a case if I decided not to sell my trailer to them —- So I’ll write up an agreement for you guys to sign….did you want it in both of your names or just yours or just ********? Also, I can give you the number for the park to talk to the manager, but my phone is dead right now

    We can’t find the title right now and can’t file for one because of the government shut down……I’ll fill you in on that as it goes but trust we will follow through with our agreement —- no document was ever sent or signed but they are trying to come after me if they can’t come up with the money by tomorrow….I would like to add that the person borrowing me the rest of my down payment backed out and I may not be able to come up with the rest of the money if its not coming from them

  8. Luke Enno says:

    Hi Stephanie,

    In theory it might sound like there is some type of agreement – a verbal contract. However, in practical reality, if the communications are merely an offer or an agreement that you no longer have faith to believe that the other party can follow through timely, then in that instance, backing out is a viable option. If one were to interpret your FB message as being an offer to draw up an agreement rather than an actual agreement, then the offer could be rescinded. If it is thought to be a verbal agreement already instead, the question is whether the other party has been materially harmed by your actions.

    If the other party hasn’t surrendered any funds/money to you and you subsequently state that you are instead rescinding the offer or considering any perceived agreement as null, there isn’t a whole lot in my opinion that the other party can argue to try and force an agreement to be followed through. Sure. Anyone can sue for most anything. But I don’t see any value in them pursuing this matter legally if you decide to communicate that you no longer are extending an offer to them to sell the trailer. Your follow-up communication should be precisely worded and should clearly state that the parties are not able to timely consummate an agreement as you reasonably expected and that any offer or perceived agreement is no longer valid.

  9. stephanie says:

    They stated they didn’t have the full 4000.00 down by the date I needed it so I was extended a new offer from anither party for the full amount and took it. Without this money I wouldn’t even have had my trailer for sale because I wouldn’t have a down payment for the home I’m trying to purchase. Now after I sold it they’re saying they have the money but its already sold.

  10. Luke Enno says:

    If you had a deadline date (especially if they were aware of it) and they failed to provide the funds by that date, then they weren’t able to honor their end of the agreement. The theory is that you are excused from performance.

    They only were harmed in that they didn’t get the opportunity to acquire the trailer but they were not out any money. So in that instance, they should have had the money by the date you needed it. They didn’t. They can argue all they want about it but that is not your responsibility. They just need to move on with their lives. There are other trailers out there!

  11. stephanie says:

    Thank you very much I really appreciate the perspective you’ve given me.

  12. Luke Enno says:

    You are welcome Stephanie. I wish you the best. From what it sounds like, you are on the right side of everything here and hopefully this other party will simply realize that and go their separate way.

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