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Signed contracts? We don’t need no stinkin’ signed contracts

We’ve all seen sales transactions where the business people chomp at the bit — the customer wants delivery, the sales person wants his commission.

Sometimes, the business people get so impatient that they proceed with the transaction without ever finalizing the contract documents.

At ContractsProf Blog, contributing editor Jeremy Telman tells of one such transaction, in the Filanto case from 1992, for the sale of boots to Russia. The contract documents were, to put it charitably, jumbled — the parties had never actually signed a final agreement, but had simply exchanged contradictory forms and emails.

Apparently the business people decided they didn’t need signatures on a final contract. The vendor proceeded to ship boots to Russia.

But then things went sour. And a federal judge in New York had to decide whether to enforce a provision in the customer’s contract form that required arbitration in Russia, which required the judge to sort through the jumbled paper trail.

To me, the actual holding in the case is less interesting than Professor Telman’s apt summary of how business people sometimes choose to roll the dice and ship the product, rather than incur the time cost of dotting the i’s and crossing the t’s on a contract:

[R]eal-world transactions are like this. The parties exchange contradictory forms which neither party ever reads, and then they both proceed based on their separate understandings of the agreement.

Neither party anticipates breach, and if breach occurs, both parties assume that they will work out a new deal rather than litigate, and so the terms of the agreement never really matter much.

The problem is that, every once in a while, the parties do litigate, and when they do, courts resolve the dispute by trying to pluck out of their very messy interactions a precise moment of offer and acceptance.

Lawyers come in handy, if at all, only in drafting form purchase orders and form acknowledgments that are designed to lead courts to determine that their clients’ forms contain the terms that should govern the deal.

[Emphasis added.]

Read it all.

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