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The subtle nuances of a contract

A contract is basically an exchange of promises. One party (them) wanting something you have (flying or engineering skill, or equipment), and the other party (you) wanting something they have (perhaps money).
 
Basic, simple. What could go wrong with that? Well, if both parties are happy in the end, nothing, and you can stop reading now. However, if there is something that one party thinks they deserve, and did not get, or if the other party feels they either gave it or do not need to, things can get sticky.
 
You may ask, at what point does an exchange of promises constitute a contract. Once agreed to, can a contract be altered to include other things? Does that alteration create a new contract, or simply amend the old one? What happens if one party does what they promise, but the other party does not? Is the contract voided or breached? These are some tricky points I will touch on in this article.

How can you protect yourself? Well, one way is to have a clear contract, or at least as clear as possible. It is important to understand that a contract does not need to be drafted by a lawyer. It does not even need to be written down to be effective and enforceable at law. It is much easier, of course, to enforce something written down clearly, than it is to win a “he said/she said” argument, but except in certain situations (land transactions for example) contracts can simply be a verbal agreement.

A contract should be simple. It should say someone will do something at a certain time in a certain way for a certain amount of money, and that the money will be paid at a certain time in a certain way. A contract should also state what will happen if any of the “certain things” do not occur.
 
A contract is not a guarantee that something will happen, but more an accounting of what has been agreed to, and what will happen (usually financially) if things are not properly carried out. We want to know, as best we can, the extent of the damages that would occur should those things we contracted for not work out.

A contract is formed once a meeting of the minds, with respect to the essential terms of the contract, has occurred and been agreed to by both parties. As long as the contract is not completely one-sided, or unfair, (“I’ll sell you my aircraft for a dollar”) it should be treated seriously by a court. There are subtle nuances that can change a contract into a bare promise, a term of art which means, “Hey, I was just kidding, I’m not going to do that!” These bare promises will not withstand the scrutiny of a judge, and the subtle nuances are in place (I imagine) to ensure lawyers go the full three years of law school instead of playing golf their last semester!
 
Once the meeting of the minds has occurred, and providing the agreement is not about engaging in criminal acts, you essentially have an enforceable contract. Does this mean you are not able to alter the contract once formed? The short answer is – it depends. If both parties agree with the change, then you can alter the language of the original contract and those changes stand. If both parties are not in agreement, then it is trickier. You may have to negotiate a separate contract with all the above requirements, or fight it out in court, or forget about it and try to do better next time.

If one party does what they are supposed to, and the other party does not, you have a different problem on your hands. Time is usually an essential term in a contract. If you pay someone to deliver an aircraft to you on a specific date, and they deliver it a week later, the contract may be voidable, and you get your money back, or in breach and you can sue for damages. More nuance due to golfing?
 
Simple contracts should be straightforward and may be done over coffee and a handshake. Complex contracts may require professional help, and it may be a good idea to have a lawyer review them. (For more on the hidden dangers of contracts, see my column called “Legal Contracts – The Hidden Dangers” in the October/November/December 2008 issue of Helicopters.)

Questions? Please leave me a message – I am out trying to improve my 30+ handicap!

Neil MacDonald is a lawyer with Harper Grey LLP, practising in Aviation Law. He holds an ATPL-H, and flies as an Air Ambulance Captain on helicopters in B.C. nmacdonald@harpergrey.com.
This is not a legal opinion. Readers should not act on the basis of this article without first consulting a lawyer for analysis and advice on a specific matter.