How To Avoid Entering the “Oops” Agreement
It plagues men and women of all shapes and sizes. It can knock you off your feet before you know what hit you…cause weeks of headaches.
It’s the “Oops” Agreement, or at least that’s what I call it.
The “Oops” Agreement is that contract you enter into without knowing it. How do you enter a contract without knowing it? Glad you asked. It happens alot more than you think it does (there are actually two real-life examples here) and the largest reason for that is the misunderstanding people generally have about contracts.
The misnomer is that in order to have a contract one must pen “here-to-there-fore-after’s” on a scroll and have it ceremoniously signed. That makes for great television, but is far from the truth.
In order to have a legally binding contract you really only need three things:
- An offer;
- Acceptance of that offer;
- And consideration exchanged between the parties.
No special ceremonies, no magic words. And emails have further complicated things with the traditional “signature” not being required under the electronic signature statutes in many states.
How might all of this play out in real life? Say I work for X organization and am trying to negotiate the purchase of six laptops. I say:
Erin: Henry, I would buy them, but only if I could get them for
Henry: Were you still trying to have them shipped to you all by
the 15th of March.
Erin: I am.
Henry: Ok, I can do that.
Though many people might see this email exchange as a preliminary understanding, most states would find it to be a valid contract. I made the offer of purchasing the 6 laptops for $525, delivered to the business by March 15th, and he unconditionally accepted. The consideration is my payment for Henry’s laptops. So if Henry ended up sending those laptops to me and invoicing I could actually be on the hook whether I intended to purchase them or not.
This slip-up usually happens (particularly with emails) because the parties actually do intend on entering into a formal agreement….at some point. The problem is most people don’t actually intend to commit themselves right at that moment. So they exchange emails back and forth throwing out details, not realizing that a contract may have been created in the process.
Perhaps you were just inquiring, and feigned more interest for the sake of getting better pricing. Or what if one of your employees takes it upon themselves to begin negotiating with a vendor? The organization could find itself unwillingly committed to an agreement, and forced to duke out its legitimacy in court.
There are a few things that can be done to avoid the dangerous “Oops” Agreement. Organizations can:
- Make it clear when talking to vendors that you’re looking for a quote and an offer is not being made.
- Institute a Request for Proposals (RFP) process and solicit bidders to get more information on items you’re trying to purchase.
- Create a contract process and designate one employee (or yourself) to procure items.
I’ll probably end up doing a “Have You” article about 1 or 2 of these pretty soon, so make sure to check back.
Other Posts You Might Like
- 10 Things A Non-profit Should Include In Its Contracts
- 5 Contracts Every Non-Profit Should Know About Part II
- Houston Area Urban League 2011 Small Business Presentation
Posted by Erin | 1 comments