Do all contracts need to be in writing? No. Often parties can have an oral agreement or show their assent to an agreement by taking certain actions; however that is not a safe strategy in the business world. An automotive parts distributor in New York learned this lesson the hard way.
Auto parts manufacturer Cummings Power Systems had been selling parts to distributor National Gear & Piston on a wholesale basis for more than a decade. The manufacturer sent its standard form of agreement to the distributor for signature nine years into the relationship, but it was never signed and the parties continued to do business.
A couple years later, the manufacturer declared the distribution relationship terminated when the distributor sought to bid on certain types of contracts the manufacturer wanted to pursue directly. The distributor sued, claiming that the unsigned agreement prohibited the termination.
The court sided with the manufacturer and determined that a lack of a signature meant that no contract existed between the parties. Because the unsigned agreement specified that it would become effective “upon the date fully executed” by both parties and neither party had actually signed the agreement, the contract was never valid.
How do you protect your business? It's time to audit all those contracts to make sure they are signed by both parties ASAP. Or it's time to load the contracts into Contract Wrangler, and we'll check all those signatures for you and alert you to which agreements are missing a signature.