A Contract by Any Other Name…Still a Contract

Many family law matters settle. Using many different settlement methods. Whatever settlement method is used, the parties need to get from a shared understanding of the settlement terms to a document confirming those terms. In many cases, this requires a contract, so the settlement is lasting and binding.

However, when parties settle their cases without the benefit of attorneys, a potential risk is making a binding contract without even realizing it or failing to make a durable contract and having the settlement fall apart.

So what is a contract?

Generally, in Maryland, a contract is an oral or written agreement, in which there is a “meeting of the minds” (so, shared understanding and acceptance) on all essential terms and for which there is consideration (so, promises exchanged by the parties).

Contracts come in different forms. For example, statements of the essential terms – whether in writing, signed by all parties or a verbal recording of the parties – are evidence of a contract. And, an offer, followed by behavior accepting or acting on the offer may be evidence of a verbal contract.

Does it matter what a contract is named?

Written contracts may be titled or not. A title may indicate an intention that the document be a contract. A contract can be titled anything: “Settlement Agreement”, “Marital Agreement”, “Term Sheet”, “Memorandum of Understanding”, “Parenting Plan”…or whatever name the drafter(s) gave it. Or have no title at all. A contract is far more than its name. Said another way, don’t assume from the name that a document is or is not a contract.

What does a contract look like?

A written contract may take many forms. Paragraphs and pages of writing. A list of terms, whether sentences, bullet points, or other format. A consent court order signed by the parties, but not yet accepted by the court. A letter or other written summary of obligations between the parties.

The first and most important indicator of a contract is signatures of the parties. If signed, it probably is a contract. If unsigned, probably not.

Other key indicators are what the document says about itself, especially:
– If it says that it is binding on the parties or that the parties shall be bound by its terms;
– If its terms are specific enough to be understood; and,
– If it contains a mutual exchange of value or obligations.

If a document is too vague or incomplete to understand, states that it is not binding on the parties (so, the parties are not obligated) unless a further writing is prepared and signed, or is conditioned upon an event that has not yet happened (like, a further, signed writing), then it may not be a contract.

What should you do if asked to sign a document?

Before signing:
– Read it.
– Ask yourself if you understand it.
– Get the advice of an attorney.

A person is presumed to have read and understood any document that he/she signs. People are entitled to make good deals and bad ones.

Family matters are complicated, as is the law. Just because you read and understand a document does not mean that it is complete, will be accepted by the court when granting the divorce, that it protects you, or it serves your best interests.

An incomplete contract runs the risk of one spouse filing suit to ask for more. A vague contract may be unenforceable or cause unintended consequences when enforced. Fraud, duress, coercion, lopsided terms, lack of attorney advice, and lack of financial disclosure may expose an agreement to being voided or set aside.

In sum, a contract is far more than its name. It is the sum of its parts. Sign wisely – for yourself, your family, and your future.

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