CONTRACT DRAFTING

It's only natural to question the validity of documents signed digitally, but this particular matter has been settled for nearly two decades. In 2000, a federal law known as the ESIGN (Electronic Signatures in Global and National Commerce) Act was passed, granting legal recognition to all contracts signed electronically — assuming that all parties involved in said contracts agree to use and sign electronic documents. A clear legal framework for electronic signatures is also provided by the Uniform Electronic Transactions Act, which is implemented in 47 states and most U.S. territories.

Memorandums of agreement (MOA) do not necessarily have to be notarized, as they are typically not legally binding —although they can sometimes be enforceable if they meet all of the conditions of a contract. Because MOAs typically serve as preliminary agreements, notarization is not usually sought. However, notarization is an option for MOAs, and, in some situations, may prove beneficial. The use of a notary provides proof of parties entering into MOAs, which, as mentioned above, can sometimes satisfy the terms of a contract. If nothing else, the MOA may serve as evidence of the parties’ intent to enter a contract and/or the existence of an oral and/or implied contract.

MOA can refer to either a memorandum of agreement or a memorandum of association. AOA refers to a company's articles of association. Both memorandums of association and articles of association serve as charter documents upon which a business is based. The memorandum of association provides basic details about the company, such as its conditions for registration. Conversely, the articles of association go in-depth, highlighting exactly how important tasks are to be carried out. In many American jurisdictions, articles of association are typically referred to as articles of organization or articles of incorporation.

The terms 'memorandum of agreement' (MOA) and 'memorandum of understanding' (MOU) are often interchanged. Both refer to a type of agreement that is less formal than a legally enforceable contract. Although MOAs and MOUs can look quite similar, small differences may exist. An MOU is essentially a statement of intention between two parties, rather than a firm commitment. Although not necessarily enforceable, an MOA is more likely to be legally binding — in several cases, courts have found that parties can enforce the terms of MOAs. An MOA may serve as an important precursor to a contract into which both parties clearly intend to enter and may serve as evidence of the parties’ intent to enter a contract and the existence of an oral and/or implied contract.

Sometimes referred to as a memorandum of understanding, a memorandum of agreement (MOA) is typically not legally binding. Rather, it essentially serves as a blueprint for later contracts, which may be legally enforceable. Those who enter into MOAs generally intend to determine which terms they might pursue in an eventual binding contract. Exceptions exist, however, and courts have occasionally deemed MOAs enforceable. It is therefore critical to proceed with caution, as considerable gray area could make what seems like a casual agreement far more formal than either party anticipates. Typically if parties desire the MOA or MOU to be binding, then the document will state that it is binding and the parties will have signed the document. Conversely, if the parties do not intend for the MOU or MOA to be binding, but only for discussion purposes, then the document should explicitly state that it is not binding and only for discussion purposes to remove any room for doubt. Most often, if the discussion of key terms of a potential agreement are to be binding, then they should be spelled out in a binding terms sheet that both parties sign. Then those terms are given to the attorneys for the parties to draft the formal binding agreement.

A contract is an agreement that meets specific stipulations to become enforceable by law. While legally binding contracts are typically written or electronically recorded, verbal contracts can be binding in select situations. Contracts may be created for purposes of tenancy, sales, or employment. In construction time and materials contracts may be used to make arrangements for projects, especially if the scope is undefined. Contracts can also be categorized based on whether they are implied, bilateral (a mutual agreement in which each party performs an act), or unilateral (in which one person completes a specified act to meet the contract's terms).

An independent contractor agreement is a contract that outlines the terms for a particular project — typically one in which an individual or company agrees to contract with somebody else (i.e., an independent contractor) on a short-term basis. The independent contractor agreement is used to establish the contractor's roles, the parties’ responsibilities, payment terms, and deliverables, such as the date on which the project should be completed. Essentially, the independent contractor agreement serves as a blueprint for all client-contractor interactions that will arise over the course of the covered project. There is a fine line between what constitutes an independent contractor and an employee and businesses’ should take extreme care to understand these differences.

While contracts and agreements hold several similarities, key differences separate them in terms of enforceability. An agreement involves any arrangement made by two or more people or entities and may not be legally binding or enforceable in a court of law. A contract is technically a type of an agreement, but it's more specific as it meets all of the requirements such as offer, acceptance, mutual consent, consideration, competence and legal purpose. With a contract, detailed terms and eligibility standards make the arrangement legally binding. Contracts can be enforced in court, whereas such enforcement could be difficult or entirely impossible to achieve for a general agreement if the agreement lacks one of the required elements of a legally binding contract, such as consideration.

To be deemed valid and legally enforceable, a contract must include an offer by one party and acceptance of that offer by the other party. Some element of consideration must also be present. Essentially, consideration means that each party must give something to get something. Generally the courts will not concern themselves with the respective value of each parties’ consideration. Both parties must demonstrate the competence and capacity to enter into a contract. In some circumstances, contracts may not be valid unless they occur in written form and are signed by one or both parties. For the contract to be binding, mutuality of obligation must occur — both parties are obliged to complete their obligations, otherwise neither are legally bound.

Terms can vary considerably from one contract or agreement to the next, but all should cover at least a few basics. Every contract should explicitly spell out the offer, the acceptance of the offer, the consideration provided by each party, and both parties’ rights and responsibilities in detail. Ideally, there will be little room for interpretation. Terms regarding payment arrangements and confidentiality should be explicitly addressed, if applicable. Whenever possible, contracts should be in writing and signed by all parties involved.