Unsigned Contracts

What if you never signed the contract?

One of the most frequent questions that my clients (and non-clients) ask me is - are unsigned contracts binding and enforceable? The situation usually involves two parties who intended to enter into contract with one another. They drafted a contract, but for some reason one or both parties never signed. Later, one party changed his or her mind, and that person wondered whether he or she is bound by contract.

First and most importantly, no attorney should try to give an answer to that question without asking for and reviewing every bit of written or oral communication between the parties. Next, what I ask is whether either party has begun to perform his or her part of the contract. Partial performance may be enough to bind a party to a contract, even if the contract was not signed.

It is important to refrain from performing work, ordering work to be done, or making any payments until both parties have drafted and signed the contract. And, ensure that all your correspondence communicates your clear commitment that the contract must be signed before either party begins performance.

Often, companies engage in multiple phase projects (usually tech related projects) that requires some performance in advance of a written and signed contract. In that case, consider executing a short letter agreement that clearly states the terms of the exact and limited work to be done prior to execution of a signed, written agreement. Or, execute separate contracts for each phase of the project.

A tech entrepreneur contracting with a developer for the development of software or hardware may find after phase one or two of the project that the developer did not meet expectations. In that case, having contracts for each phase allows the parties to part amicably mid-project. 

Conduct by the parties (including every piece of oral or written communication between the parties) which recognizes the existence of the contract may be sufficient for the contract to be enforceable.