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Legal Commentary: Is An Unsigned Contract Still a Valid Contract?

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Here’s a typical situation in the construction industry: Subcontractor submits a bid, contractor notifies subcontractor that its bid is accepted, contractor sends a subcontract for signature, subcontractor starts work on project but doesn’t sign or return written subcontract agreement.  Later, the parties get into an argument about something other than the unsigned subcontract.

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Do they have a contract, and are the terms of that contract those set forth in the unsigned subcontract?  Under those facts, they probably do have a contract and the unsigned subcontract terms and provisions are probably applicable.  That’s what the Colorado Court of Appeals generally concluded in a 2005 decision.

In that court of appeals case, the issue was whether the parties’ dispute was required to be arbitrated because of mandatory arbitration provisions in the unsigned subcontract.  The Court of Appeals concluded that a signature by one of the parties was not necessary to have the arbitration provisions apply if, by the non-signer’s action (or inaction), it had otherwise agreed to the subcontract.

What this all means is that in most instances, a construction contract need not be in writing or even signed by both parties. That is particularly true if, under the above scenario, the subcontractor gets the subcontract document and starts work on the project without objecting to any of its terms or provisions until after a dispute arose.

But a word to the wise:  Don’t put off reviewing subcontract (or contract) language for which you may later become answerable.  If you don’t agree with any of the terms and provisions, let the other party know and do that promptly—preferably in writing. And if you don’t understand any of the terms or provisions of the contract, get good advice.

The consequences otherwise might be very serious if someone thinks that because he or she didn’t sign a contract document provided by the other party, there’s no contract.  There may be a contract nevertheless and bad things could possibly happen.

Albert B. Wolf is a principal in the Denver law firm of Wolf Slatkin & Madison P.C.  This column was written with the intent of providing general legal information intended to be reasonably accurate although not comprehensive.  Readers are therefore urged to consult their attorneys for any specific legal advice they may desire concerning the subject matter of this column.

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