Wednesday, January 25, 2012

Contract Law Basics

Contracts can be intimidating things to nonprofits.  Once you put your signature on that piece of paper, it seems like the whole world changes.  Everything you do from that point on must be weighed carefully.  They sure can be a hassle, but contracts are necessary to allow organizations to get the resources they need to carry out their programs.

Every nonprofit program is different, but they all have at least one thing in common: Concern with contract law.  Contracts can provide a lot of legal issues for organizations.  Management always needs to be prepared for any situation.

In her book "Good Counsel," Lesley Rosenthal lays out the basics of contract law.  She writes that contracts must be written with reasonable specificity so that each party can perform their necessary obligations under the agreement.  These specifics include the parties to the contract, when or over what period of time the exchange of obligations is to occur, and any other details that are determined to be important to the parties.  If none of these details are included the contract may not be considered valid, because it only expresses that an agreement has been reached, rather than a binding agreement.

Once there is an offer and acceptance to an agreement, Rosenthal writes that the parties need to render the agreement in writing and sign the document.  This will make the agreement binding.  Some organizations do confirm their contracts with oral agreements, but it is safer to do it in writing so you have something to refer back to should an issue arise.  Note that "in writing" doesn't necessarily mean on paper.  Electronic contracts are equally recognized in most places as binding for both parties.

Now that the contract is written, you can put it away and begin living up to your end of the bargain for the life of the agreement.  You will likely never have to look at the contract again unless a problem arises--which is hopefully something you and your management team will be able to avoid.

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