Drafting a Contract: Getting an Attorney or Drafting Yourself?
I had a client call with an issue on whether or not he had a lawsuit against another party for a breach of contract claim. When everyone else told him no, Howard Law found a way to identify a claim and get the other party to perform their end of the contract without even filing suit.
A Little Background
Client, let’s call him Joe, decided to sell his car to a friend but the friend didn’t have enough money to pay it upfront. Joe, being a good friend, allowed the friend to take the car and make monthly payments to Joe personally. Joe was smart in thinking he needed a contract to make everything office, and he was smarting. But instead of going to a local attorney and having that attorney draft up a contract with all his needs, Joe wrote up a contract himself.
The contract was just a hand written single page document, but it was good! It detailed out the VIN of the vehicle, the terms of the agreement, broke down the payments and was even notarized! Way to go Joe! In addition to the monthly payments, the friend was required to keep insurance on the car, pay for tags and pay the personal property tax on the vehicle. Both parties signed the agreement in front of a notary and the friend was making regular payments to Joe every month for about a year.
One month the friend contacts Joe and informs him that friend will not be making the payment this month. The friend also informed Joe they were not going to be paying the personal property taxes on the car. Friend also informs Joe, the contract states there is a “3 month grace period” for all payments….wait….what?!
Yup, even though Joe had the right idea in drafting up a contract and having it notarized, he mistakenly worded one single sentence in that contract which allowed friend to not make cars payments for 3 whole months before the payments were due. Uh Oh!
So Joe contacted some attorneys to find out what they could do for him. They all informed Joe he was stuck with the contract and there wasn’t anything they could do. Howard Law thought otherwise and not only got the friend to make the monthly payments, but also had the friend pay all the personal property taxes that were due. All of this without even filing a suit. How did we do it?
Elements of a Valid Contract
For a contract to be valid there must be an offer, acceptance and consideration. Offer and acceptance seem pretty straight forward, and for the most part they are, but keep in mind sometimes these two elements can get a little blurry. Consideration is a major part of forming a valid contract.
Consideration must have a detriment to the personal making the offer or a benefit to the other party accepting the offer. A good example of something not being a valid contract due to no consideration is a promise of a gift. With a promise of a gift, there is a lack of mutual exchange of consideration; the recipient of the gift doesn’t pay anything in return for the gift.
Breach of Contract
In order for there to be a breach of contract, you will need to prove three things, (1) that a valid contract exists; (2) that a party breached the contract; and (3) damages. In Joe’s case, you could argue there was a valid contract (I’ll explain why I say “argue” later), but the other attorneys were convinced there wasn’t anything that could be done because the friend had not yet breached the contract and there are currently no damages to Joe.
How We Saw It Differently
While the other attorneys Joe contacted were correct, we thought there could be a different, more creative if you will, way to approach this situation. When Joe contacted Howard Law, it was the day the payment was due and he was unsure if the friend had sent the check or deposited the money into his account. But Joe read me the text messages from friend where friend stated without a doubt, the payment would not be coming this month. And on top of that, remember, Joe misstated that 3 month grace period, so the friend could technically get around not making the payment for 3 whole months before Joe could do anything. This is where we thought there might be enough here to at least have a little talk with friend and find a possible claim for an anticipatory breach of contract.
Anticipatory Breach of Contract
Once a party to a contract unconditionally refuses to perform under the contract as previously agreed to it is considered repudiation or an anticipatory breach. The repudiation must be made clear, straightforward and direct without any room for interpretation.
Here, Joe had a text message from friend clearly stating they would “not be making the car payment anymore” and would “not be paying the personal property taxes on the car.” This was a clear, straightforward and direct statement to Joe repudiating the contract.
What We Did For Joe
After talking to Joe over the phone, he sent me the contract to review and forwarded me all the text messages between him and friend. After reviewing all the documents, we made contact with the friend. After laying out our case to friend, Joe got a text message from the friend within 24 hours stating that the monthly payment was deposited into his account and the personal property taxes were paid on the car that afternoon. Wow! That was quick! We worked with Joe to identify all the possible issues, identified what he wanted as an end result and developed a strategy to find the best way we could arrive at that result.
What About The Grace Period?
The grace period was an issue, there wasn’t a doubt about it. But when reviewing the contract and looking at the surrounding sentences, it was clear that Joe didn’t mean to say there was a 3 month grace period. What he truly meant was that if friend did not make payments for 3 months, Joe had a right to repossess the car. When reading the sentences together in their entirety, it made sense, but those two little words really threw a wrench in everything.
While we identified this issue, we were already prepared to argue it if needed. Having a 3 month grace period just doesn’t seem practical, you’re not going to get that much time to make your car payment to any bank or buy-here-pay-here car lot! Another possible argument would be if the contract was even valid at that point. As I mentioned above, there must be consideration for the contract to be valid. If friend knew about the grace period and knew Joe mistakenly worded that sentence, we could possibly have a good argument for invalidating the contract due to its lack of validity.
If you’re involved in a contract dispute with another party and need help, contact Howard Law at (314) 325-9868. We’ll take the time to understand your case, identify your needs and help get you to the best result possible.