Business owners and their employees often deal with contractual relationships in the course of running almost every type of business.
Though lawyers almost always advise against it, business people often form unwritten “handshake” deals with partners, suppliers, competitors, and customers. Many an unscrupulous business person has been “saved” by the fact that the deal to which he agreed was not in writing. Similarly, many managers have been “saved” by the fact that the oral promises their employees made were not easily enforceable.
The age of social media, for better or for worse, will make it more difficult for business owners who do not properly educate themselves and their employees regarding “contracts” to evade the consequences of thoughtless agreements. And thoughtless agreements will not only very likely occur more often as more business people utilize social media, these agreements will also occur as part of a nearly indestructible written record.
Accordingly, to protect your business, you (and your employees) should understand what a contract is, what agreements can be enforced even though they are not actually contracts, and how to apply the rules of contract law to your social media interactivity to avoid damaging your business.
What is a contract?
A contract is “an agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration.” While the definition may seem relatively simple, women and men of great intellectual ability have devoted the better part of their lives to explaining what the words “agreement,” “specific,” “promise,” and “consideration” mean. So what does a business person without the better part of his life available to devote to this definition need to know?
First, an “agreement” is an offer and and acceptance, often described as “mutual assent.” In very basic terms, this means that one party describes what they are willing to do in exchange for the promise of the other party, and the other party agrees to the exchange.
Second, the terms of the offer must be “specific.” The word “specific” in the context of contract law, however, is not the same as the generally accepted definition of “specific.” The standard for specificity in contract law is very low: contracts without terms such as price, volume, party identification, and timing are routinely enforced. The standard is especially lenient when applied to contracts between “merchants.”
Third, “consideration” is not easily defined but is usually found relatively easily, as any relinquishment of a right or property generally meets the definition.
What non-contractual agreements are still enforcable?
Even if they do not meet the definition of a contract, certain promises are enforceable for equitable reasons. Generally, even though a contract has not been perfectly formed, a party who gives up a right in reliance on a promise may still be able to recover. In essence, the law imposes a contract to “ensure fairness” or “avoid injustice.” These “quasi-contracts” generally fall into two similar categories:
Actions based on the theory of quantum meruit basically state “we may not have formed a contract, but I should still recover as much as I deserve.” If a party provides a benefit in reliance on the perception of a contract (and in many instances even if the party knew there was no contract), that party may still be able to recover. For a practical application of quantum meruit, check out this article from the National Association of Realtors.
Actions based on the theory of promissory estoppel require three elements: (1) a promise the maker should expect will induce action, (2) justifiable reliance on the promise, and (3) that injustice can only be avoided by enforcing the promise. Promissory estoppel is generally a more difficult claim to succeed on than quantum meruit, but the damages can often equal those that would have been awarded had a contract existed. For more about promissory estoppel, check out this comprehensive analysis from the UCLA Law Review.
What should I know about contracting and social media?
Contracts and quasi-contracts are relatively easy to form and were that way long before the advent of social media. But historically many contracts have not been enforced due to the difficulty of creating a record to clearly show what was discussed between the parties. (This is not the only reason, but is certainly a major reason, why attorneys prefer almost every agreement to be in writing.)
E-mail has definitely made it easier for parties to put together a written record of contractual discussions that historically would have been shared only orally. But the use of social media for interaction between business people has made this written record more conversational (and thus often less scrutinized), as well as virtually instantaneous. What before social media were discussions that would have led only later to a written record (at which time the parties could decipher what exactly the other party perceived had been agreed to) has now become a complete written record of the conversation.
Social media may already be an important marketing tool for your business. And while the instantaneous written record that is social media is not all bad (especially if you are looking to enforce the promise), it does represent a shift in the way businesses approach contracting. With a few notable exceptions, most business owners are not yet employing social media intentionally as a contracting tool. But this practice will undoubtedly become more widespread. For an example of a “rogue contract” that is currently the subject of litigation, see R & B singer Ryan Leslie’s video offering a $1 million reward for the return of his laptop.
While it would certainly be “lawyer hype” to say that you should never contract via social media without an attorney looking over your shoulder, you and your employees should certainly be aware of what it takes to form a contract or quasi-contract to avoid thoughtless agreements that could harm your reputation, and ultimately, your bottom line.
If you have any questions regarding contract law or any other social media topic, please comment below, contact us, or submit your question to our free Q&A service. Stay tuned for our next post in the Social Media Legal Issues series, in which we will discuss using social media as evidence.