Working Without a Contract: What You Need to Know

You are contacted by an organization about the possibility of planning a meeting in three years. Your compensation is discussed, but no contract is signed. There were, however, extensive conversations about the meeting and what your role would be. To secure the client, you even offered to fly to the chosen location to conduct a detailed site inspection. The company’s CEO takes you up on this offer and tells you to come back with a draft hotel contract. You do, but find out that while you were away, another planner, who has lower fees, was contracted. Over your objections, the CEO says: “We had no signed contract in place.” Do you have a case, or is the CEO right? 

What Is a Contract?
If you don’t have a formal contract, is there any hope of obtaining compensation for work you have done? Yes. An oral contract is generally just as enforceable, although the hard part is proving the terms of the agreement. You might argue that an oral contract existed in which you essentially were hired to handle the planning of the meeting and negotiate the hotel contract. But the CEO can respond that there is a doctrine in many states called the Statute of Frauds and it says, in essence, that if a contract cannot be performed within one year, then it must be in writing.

However, all is not lost. Courts have long recognized that there are some situations in which it is just plain unfair to let a party off the hook. Specifically, if a person performs services in reasonable reliance on statements made by another party, then a contract will sometimes be implied and you can be entitled to the fair market value of your services. The legal term for this is quantum meruit. 

Simply put, it is designed to prevent unjust enrichment to a party who benefits from the efforts of another when a true contract was lacking.

So you could argue that you made the site visit and began contract negotiations in reasonable reliance on the encouragement of the CEO and that the organization would be unjustly enriched if it did not pay you for your efforts. If a court agrees, you could try to obtain the fair market value of your work to date.

Still, it must be stressed, both planners and the organizations that consult with them are asking for trouble if they rely on a vague oral relationship.