You don’t have to write a contract to make it binding. Yes, the old fashioned spit and a handshake can be binding in many situations. I’m writing this article to give a very, very broad outline of what a contract is and how to create a valid agreement. Please, do not mistake this for legal advice. I’m just a lawyer who sees artists get screwed over pretty frequently. Use this as a guide to wade through the basics of making an agreement. Always remember, if you think you’re getting screwed, then definitely talk to a lawyer.
Most contracts are a promise for a promise. These are known as bilateral contracts. A bilateral contract exists when there is an offer, acceptance, mutual assent, and consideration. Consideration is fancy talk for “that which is exchanged.” So, if you offer to paint my house for $200, then the consideration in the exchange is the $200.
Offers without consideration can be revoked at will. So if someone says, “Come sing at my party,” then you can bail out without any repercussions. Offers without acceptance are also no good. If your friend says, “Come play at our event for $5,000” and you don’t definitively say “Yes,” then you can bail without incident.
Remember, you can also terminate an offer. So, if you say, “Come play this gig for $600,” and then change your mind, you’re off the hook so long as the other party did not accept the offer. However, if you said, “Why don’t you come play our gig for $600? Sleep on it.” Then the offering party would not be able to revoke the offer until at least the next morning (depending on how we interpret the phrase “sleep on it.”).
Express rejections terminate offers. Counteroffers also terminate offers. This surprises a lot of people. If you say, “Nah, but I’ll play your gig for $10,000” then you’ve rejected the first offer and then made a separate offer of your own. The initial offer is now dead and you’re now in the driver’s seat for negotiations. The same goes for conditional acceptances. If you say, “Yes, if you do the following things,” then you do not have an agreement. You actually made a counteroffer.
What about putting it in writing? Well, there are only a few types of contracts that MUST be in writing: (1) a promise to pay the debt of another; (2) any exchange of real estate; (3) contracts that take more than a year to perform; (4) sales of goods in excess of $500; (5) marriage. Most of these situations are not going to apply to young artists and musicians. Regardless, there are some defenses if you neglected to get a contract in writing, but those are outside the scope of this post.
So, does this mean that you should just have a slew of oral agreements? Absolutely not. The faintest pen beats the finest memory. Memorializing contracts is necessary as a matter of professionalism and common sense. Your memory is just as faulty as the other party’s. There are numerous contracts that should be put in writing in order to handle difficult conversations before they ever arise.
No contracts can be unconscionable. In other words, the terms of an agreement can never be so lopsided as to ruin the other party’s situation. Courts look disdainfully upon scammers who get you to sign on the dotted line without understanding what you’re giving away.
Breaches of contract do not necessarily invalidate a whole contract. A minor breach is generally no big deal. So, if you’re scheduled to show up for rehearsal at 5:00PM and you’re fifteen minutes late, then the owner of the establishment is still on the hook for paying you. If you show up fifteen minutes after you’re supposed to perform, then you may have a major breach of contract. At that point, the artist may not be able to enforce the contract unless the artist can fix the problem.
So, what remedies are available to you if someone breaches a contract? Well, the typical damages are: (1) compensatory damages (designed to give you the benefit of the bargain) and (2) consequential damages (additional expenses incurred by the other party’s noncompliance). The general rule of thumb is that damages are designed to put you in the place you would have been financial had the contract been enforced as originally agreed. The multimillion dollar lawsuits you hear about with personal injury actions are pretty rare in the contract arena. Those lawsuits have large payouts because of medical bills, lost wages, future expenditures, etc. Those factors are not at play in most breach of contract cases. That being said, contracts typically delineate the largest, most expensive business transactions in the world. As such, there is a lot of high dollar breach of contract litigation.
There are numerous defenses to breaches of contract. The first is specific performance. This makes sense if you hired someone to perform a service and they failed to do so. So, if I hire you to paint my portrait and you bail, then I can get the judge to make you paint me.
A second common defense to breach of contract is rescission, which unwinds the contract. This typically results in giving back the money and paying any consequential damages.
There are a few defenses related to mistakes. If both parties misunderstand each other, then you have a mutual mistake. Mutual mistakes destroy mutual assent (remember that from above?) and there was never really a contract in the first place. A unilateral mistake can invalidate a contract if you make a mistake to a material fact to the contract.
Obviously, any hint of fraud or misrepresentation is a defense to a contract. If you are being defrauded, then you do not have to perform that contract. Of course, you have to prove the fraud in a court of law, but that’s another article altogether.
Finally, courts may reform a contract. If there is a valid contract, then courts may exercise their right to make a contract conform to clients’ understandings. Don’t get your hopes up on the courts rewriting a contract to suit your lawsuit. This is reserved for special situations.
There you have it. This is the least you need to know about how to create a contract. Again, do not take anything here as legal advice. Rather, use this as a starting point for your own research into contractual issues.