Not only is it important to have a written contract that clearly and unambiguously outlines the terms of your agreement, now more than ever, it is important to have written documentation detailing the contract negotiations and the parties’ intent leading up to the final signed agreement.
While many states adhere to the “4 Corners Rule”, a growing number of jurisdictions are using other evidence of the parties’ contractual intent in the interpretation process. For instance, emails, memoranda, letters etc. of the contract negotiation process would be deemed admissible to help the Court understand the true intent of the contract. A court may consider “all relevant evidence may be examined to understand contractual intent.” This “relevant evidence” would be (a) contemporaneous acts of parties; (b) bargaining history; (c) custom usage and terms; and (d) interpretation of disputed terms by looking at the parties’ actual conduct. In this digital age when much of our communications take place via email or text, it is important to save those communications as evidence of your contracting process. It is equally important to take detailed notes of your telephone or in person conversations and detail why you wanted a particular provision included in the contract. Remember that the contract related litigation may not happen for many years and the original drafting parties may no longer be available or have a recollection of what happened. While you don’t want to think about the possibility of litigation, you still need to plan for it and prepare that possibility and keeping detailed records is one way to do it. Of course, actually having a written contract is the best way to avoid misunderstandings that lead to litigation.