Q: One of our agency's major travel suppliers has presented a document called an "Agreement." When I asked the sales rep whether the document was a contract, he said, "No, it's just an agreement." Another vendor calls its document a "Letter of Agreement." One hotel issues a lengthy document for a group that has no name at all, as it is just a business letter to be signed by both parties. One corporate account calls its agreement an "Order"; another calls it a "Master Agreement." A technology vendor's agreement is called a "license," and another is called a "lease." What, exactly, is the difference between a "contract," "agreement," a "letter of agreement," an "order," a "master agreement," a "license" and a "lease"?
A: These terms are synonymous. The documents are all contracts. The names chosen by the contract drafters are just a matter of presentation, not legal effect.
Under the law of every state, it is not necessary to use a particular form or format for a contract, and it is not necessary that the document have any particular name.
Further, it is not always necessary for the parties to sign, if they express their assent in other ways, such as an email exchange. Often, there is no single document that constitutes the contract, but rather a series of letters or emails establishing or amending the contract.
Finally, contracts can be completely oral under certain circumstances. In the travel business, one example would be the parties' provable, mutual promises, made at a business meeting, to keep last year's written contract in effect despite its expiration.
By now it should be clear that a contract is not a document at all. A contract is really a relationship between the parties that meets all the elements needed for recognition by the law.
In business contracts, the elements needed are promises by each party, a definite time, a definite price, a lawful purpose and the intent of each party to be bound. If all these things are present, there is a contract -- no matter what you call it and no matter what form it takes.
If that is all it takes, why do lawyers add so much standard, lengthy, legal language to contract documents? The main answer is that each party's lawyer wants to avoid uncertainty by limiting the cost of unexpected events.
For example, hotel contracts for groups usually contain force majeure clauses, which state that the hotel does not have to make good on its promises if there are unexpected events such as floods. Without the clause, the hotel could be liable for the additional cost incurred by the group to make arrangements at a higher-priced hotel at the last minute.
Another reason for all the legalese is to avoid uncertainty about which promises constitute the contract and which do not. A clause stating something such as "This agreement is the entire agreement between the parties and supersedes all prior or contemporaneous agreements or understandings" means that earlier email exchanges and side letters do not count.
So, the legalese is not strictly necessary, but it can save money and help avoid controversy. Some of it protects only the party drafting the contract, so if you are the other party, you need to understand which clauses may hurt you.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].