June 28, 2007

It's not a contract until the "By:" line is executed

An unexecuted written agreement can be binding, but only if there is mutual assent between the parties to the agreement. In TERRY PAUL, ET AL. v. MERIT CONSTRUCTION, INC., the Tennessee Court of Appeals held that a defendant general contractor could not enforce an arbitration provision contained in a contract that was partially filled out by the plaintiffs. The plaintiffs were were masonry subcontractors who had been working on the subject construction site for months, before the GC presented them with the standard form of Agreement between Contractor and Sub-Contractor. The facts discussed by the court indicate that there was evidence of an unresolved disagreement about the terms of the Agreement between the parties. One of the plaintiffs wrote their name in the "Subcontractor: ______" line of the acknowledgement in the Agreement, but did not execute the "By: ______" line. According to the Court, this did not constitute execution or mutual assent.

Perhaps the holding would have been different had the GC presented the Agreement before the plaintiffs began their work. That way, the GC could argue that the act of beginning work would manifest assent to the terms of the agreement. In this case, the Agreement was presented months after the start date, and therefore the act of continuing work merely manifested the intent to continue under the prior oral agreement.