What Constitutes a Contract?

What Constitutes a Contract?

Q: I have written to you a few times in the past and value your professional advice. I seek it once more.

Party A signs a contract and sends it to Party B to countersign. Party B makes a change to, or simply strikes through, some provision of the contract, initials that change, signs the contract and sends it back to Party A.

I contend that without Party A also initialing those last-minute changes, the changes aren’t valid and wouldn’t be upheld in a court of law. A contract is, after all, a “meeting of minds,” and if one party makes changes that the other party is unaware of, then the essence of the contract isn’t met. As such, those changes are invalid, and perhaps even the entire contract is null and void.

Can you elaborate?

A: Your last statement says it nicely; there’s no contract.

Oh, I suppose that if the change is trivial and both parties agree that the rest of the document is valid, a court might uphold it. But that agreement by both parties is key; absent it, no matter how trivial the change may appear to an external observer, the parties haven’t reached that “meeting of the minds” you mention.

That’s the superficial answer to the carefully hypothetically phrased question you asked, and the answer you probably expected and, I think, wanted. But few people take the trouble to write me with pure hypotheticals, so let me take it a step or two further.

Let’s presume Party A, although not initialing the contract revision made by Party B, decides to go do business with Party B anyway. This wouldn’t be astonishing in transportation, where written documents (including contracts) are often considered secondary to the actual process of moving goods.

Perhaps this lasts a short time, perhaps a long time, but suddenly — whammo! something goes awry. The contract would hammer Party A because of the misadventure, so Party A (could that be you?) suddenly prefers to renounce the agreement. It then discovers, “Hey, we didn’t formally accept Party B’s change,” and decides maybe that’s a good way to get out of its commitment.

There are two possibilities: The change was irrelevant to the problem, or the change was critical. I lean toward the latter, because you didn’t focus on repudiating the whole contract, but either way I don’t a lot like your — excuse me, Party A’s — position.

I mentioned earlier that agreement between the parties is the only justification for deviating from the written contract. But agreement may take two forms, one explicit and the second implicit, and while Party A avoided the former (by not initialing the paper), it’s possibly hung up on the latter.

If I’m correct that the parties have been doing business more or less in accord with provisions of this contract, the fact it wasn’t formally put into effect with proper signatures and initialing becomes secondary. I think most courts would uphold the validity of at least the agreed and implemented provisions of the contract.

That brings us, of course, to what appears to be your sticking point — the clause altered/amended/deleted/whatever by Party B but not initialed by Party A.

Because you don’t mention it, I’m going to assume Party A never registered any express objection to this change. That is, it never contacted Party B to say, “We don’t like this provision and don’t agree to it.”

Even so, according to my hypothesis, Party A proceeded to do business with Party B under other terms of the contract. From which two things inexorably flow:

-- The offending provision was not, at the time, sufficiently important to Party A to thwart its desire to enter into the relationship circumscribed by the contract. Indeed, Party A may not have objected at all, and its failure to initial the provision may have been merely an oversight.

-- Party B, not being on notice of Party A’s putative disagreement with the clause in question, might have reasonably assumed Party A accepted it. To be sure, Party B never received back a copy of the document with the clause properly initialed, but that could have been an oversight, too.

Both things lead me to the conclusion that a court might enforce this provision, too. While I of course lack many facts and details, the possibility does exist. Sorry if this dashes your hopes.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; e-mail, BarrettTrn@aol.com; phone, 843-559-1277. Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.