In a "comic" strip several years ago, Lucy promised Charlie Brown to stop pulling the football away when he tried to place kick it. They shook hands on the promise. But, when he ran up to the football, she again pulled it away, and he went flying. When he complained to her, she said that a woman's handshake is not legally binding.
Utility systems operate by many contracts-with customers, vendors, construction contractors, engineers, developers, consultants, accountants, attorneys, other utilities, etc. Often times, these contracts are oral-a handshake, if you will-or if in writing, the writing is sketchy or incomplete.
Oral agreements may be workable as long as no dispute arises. However, many different kinds of disputes can arise over the terms of an oral agreement, such as price, completion date, performance standards, etc.
If a contract is not in writing, or the writing is incomplete, any dispute is a ticket to the courthouse. There, the terms of the agreement-if in fact the court concludes an agreement exists-will be determined by a judge or jury, not by the parties to the contract.
The purpose of a written contract is to fully state the intent of the parties. In such a case, any dispute will be resolved in court by review solely of the "four corners" of the document. External evidence of the parties' intent-extrinsic or parol evidence-is not to be presented.
As the Illinois Supreme Court has stated, "an agreement, when reduced to writing, must be presumed to speak the intention of the parties who signed it. It speaks for itself, and the intention which with it was executed must be determined from the language used. It is not to be changed by extrinsic evidence." Air Safety, Inc. v. Teachers Realty Corp, 706 N.E. 2d 882, 884 (1999).
However, if a contract is oral, or incomplete or ambiguous if written, extrinsic evidence generally is allowed to be presented by witnesses, prior conversations, documents, etc. J & B Steel Contractors, Inc. v. C. Iber & Sons, Inc., 642 N.E. 2d 1215, 1217 (1994). In other words, a he said/she said situation arises. The risks of such litigation and uncertainty of outcome are apparent.
What conclusions follow?
1. Water and wastewater utilities should reduce agreements to writing.
2. Written agreements should contain accurately all terms and conditions intended by the parties in unambiguous language.
3. If a written agreement is prepared by the other party, the utility should carefully read and understand all terms. This is true particularly for the so-called "boiler plate" provisions.
4. The agreement should be signed by representatives of all parties with evidence of their authority to sign.
5. The agreement should contain an "integration clause" to the effect that the contract contains the full agreement of the parties.
6. At least non-routine or complex agreements should be crafted or reviewed by counsel.
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