Contract Law - Part 3: Draft a Contract

Drafting for a sale of goods

A contract for thirty pairs of VR goggles can leave out the price and still be enforced. If the parties meant to make a deal, Florida’s version of the Uniform Commercial Code (opens in a new tab) supplies a reasonable price at the time of delivery. It supplies a missing delivery place and date too: the seller’s place of business, and a reasonable time. What it will not supply is the number of goggles. In the Draft a Contract activity, you write down the deal TotallyVR and Meta Lounge actually made, so their terms govern the sale instead of the Code’s defaults.

Which law governs comes first, because it decides which defaults are waiting. Goggles are movable things, so this contract is a sale of goods under UCC Article 2. A contract for services would fall under the common law instead, with different rules for forming and performing it. A sale of goods also raises questions a service contract does not. Who bears the loss if the truck carrying the goggles crashes on the way to Atlanta? When may Meta Lounge reject a shipment with cracked lenses? And what does TotallyVR promise about the goggles themselves? The last question gets its own section below, because the Code answers part of it before the drafter types a word.

The clauses that decide the case

A contract dispute usually starts over something concrete, like a late truck or an unpaid invoice. The boilerplate provisions at the back of the contract rarely start the fight, but they shape how it is fought. One clause sets where a lawsuit is heard, one picks the state whose law applies, and one decides who pays the lawyers. Those answers can decide whether a claim is worth bringing at all.

Sandy’s four clauses come from George Hathaway’s 1998 column (opens in a new tab), which rewrote common boilerplate in plain English. Start with the fees. Each side in an American lawsuit ordinarily pays its own lawyer, win or lose, unless a statute or the contract shifts the cost. Without a fee clause, TotallyVR could spend more collecting an unpaid invoice than the invoice is worth. Hathaway’s attorney fees clause sends the bill to the losing side instead. Florida adds a rule for drafters tempted to protect only their own side. Under section 57.105(7), Florida Statutes (opens in a new tab), when a contract gives fees to one party, a court may also award fees to the other party if it wins.

An integration clause closes the file on what was said before signing, and Hathaway fits it into a single sentence. Suppose Harry Simpson remembers a sales call in which someone at TotallyVR promised free replacement straps for a year. If that promise never made it into the signed contract, the clause is there to keep it out. Cornell’s Wex entry on the integration clause (opens in a new tab) explains how the clause and the parol evidence rule work together to shut out earlier agreements.

The paired clauses of choice of law and severability handle two more risks. This deal touches two states, with the seller in Daytona Beach and the buyer and the delivery address in Atlanta. Because the sale bears a reasonable relation to both, section 671.105, Florida Statutes (opens in a new tab), lets the parties choose either state’s law. A choice of law clause makes that choice before anyone has a reason to fight over it. Hathaway wrote for Michigan lawyers, so his clause picks Michigan law; yours picks Florida. A severability clause covers a different risk, a court striking one provision, by asking the court to enforce the rest.

What the Code writes into the deal

Some terms are in the contract whether anyone types them or not. TotallyVR sells VR goggles for a living, so each pair it sells comes with at least one of the UCC implied warranties. The first is the implied warranty of merchantability (opens in a new tab): a promise, made by law, that the goggles are fit for the ordinary purposes goggles serve. The second depends on what the seller knows. Meta Lounge is a bar, so its goggles will pass from customer to customer all night. If TotallyVR has reason to know that, and Harry Simpson is counting on TotallyVR to pick goggles built for it, the sale also warrants fitness for that purpose.

The deal’s 12-month warranty is a third promise, an express one, and it does not displace the implied ones. A seller who wants to limit the implied warranties has to say so, and UCC section 2-316 (opens in a new tab) sets the terms. In a written contract the disclaimer must be conspicuous, and a disclaimer of merchantability generally has to mention merchantability. Florida’s Code, in its definitions section (opens in a new tab), calls a term conspicuous when a reasonable person it works against ought to have noticed it, and it leaves that call to the court. Silence is not a disclaimer. It leaves the default warranties in place, which is why the warranty language in a sales contract is never decoration.

The writing requirement

At $2,455 a pair, thirty goggles cost far more than the $500 that brings in the statute of frauds. Under UCC section 2-201 (opens in a new tab), a sale of goods for $500 or more generally cannot be enforced against a party who has not signed a writing showing the contract. The writing can leave out or misstate other terms and still count. The quantity is different, because the contract is enforceable only up to the quantity the writing shows. Cornell’s Wex entry on the statute of frauds (opens in a new tab) names the other contracts that most often must be in writing, such as sales of land.

Florida’s version, section 672.201, asks for a signed “record.” Under the Code’s definitions, a record can be electronic, and so can a signature, if it is attached with the intent to adopt the record. An email or an e-signed PDF can satisfy the statute. A draft nobody has signed cannot. However complete it looks, it generally cannot be enforced against a company that never signed it.

The signature can come from the party itself or from its authorized agent. A company cannot hold a pen, so every signature on this contract comes from an agent: Derrick Young for TotallyVR and Harry Simpson for Meta Lounge. That is why the signature blocks have to show whom each person signs for.

Drafting the contract

Left to itself, the Code would give this sale a reasonable price, a reasonable delivery date, and a set of warranties no one discussed. Your contract decides which of those defaults the deal keeps and which it replaces. The Draft a Contract activity has you build it from the TotallyVR template and add Sandy’s four clauses in Hathaway’s plain words. Check each term against the deal before you post. The AI can produce a draft that looks finished in minutes. Only your check makes it finished.