What to do if a Contract is Lost or Destroyed?
Sometimes it happens that a contract gets lost or is destroyed. The contract might not be filed properly among your business records, or the contracts might have not been boxed up during the most recent relocation, or the box went missing or there was a fire or flood. So, what happens when a contract goes missing or is destroyed?
Legally speaking, not too much “happens” if a contract is lost or destroyed. A missing or destroyed contract is still enforceable under California law. The main legal effect is with respect to what evidence must be shown in court if there is a lawsuit over a breach of the contract. In general, if the contract is not lost, a copy of the contract is presented to the court. If the contract is lost and all copies are also lost, then other forms of evidence must be used to prove what was written in the contract.
Before the litigation stage, there are several preventative measures that should be taken. First, it is wise to have a good contract management system. This can be a simple as a spreadsheet that lists the various contracts into which your business has entered. A contract management system can ensure good tracking of contracts and can be a helpful guide to locating missing contracts. Second, it is a good business practice to scan the originals of important contracts and store them electronically. Under the California Evidence Code, §§ 1552-53, electronic copies of documents like contracts are presumed to be valid and can be used if the original signed copies are lost or missing. Furthermore, make more than one copy of the scans. Of course, the electronic copies should be stored separately from the original paper contracts. Third, it is useful to have your trusted San Diego corporate attorney keep copies of important contracts, particularly if they were subject to significant negotiation and revisions.
Aside from prevention, if you discover that certain contracts have been lost, you might be able to obtain duplicate originals or copies from your contracting partners. If litigation has already begun, there are legal mechanisms for requiring that the other party produce true and accurate copies.
The most difficult situation of lost/destroyed contracts is where the original contract and all copies have been lost or destroyed. In general, under what is called the “Best Evidence Rule,” the original signed contract is the evidence that should be presented to the court if there is a lawsuit. However, where the “otherwise admissible original” is unavailable, certain “secondary evidence” is allowed. Secondary evidence would include unsigned and/or partial copies. See Cal. Evid. Code, §§1520-23. Finally, if there are no copies or partial copies, then the evidence rules allow for oral testimony with respect to what the contract said and the use of similar contracts (if any). For example, if you use a template or form contract that is substantially similar to the one that has been lost, it is possible to use that template/form as part of your evidence for what was contained in the missing contract. If the other side disagrees, they will have to present counter-evidence and testimony that the contract was not similar to the template/form being presented.
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For more information, call experienced business attorney Michael Leonard, Esq., of San Diego Corporate Law. Call Mr. Leonard at (858) 483-9200 or contact him via email. Mr. Leonard has been named a “Rising Star” four years running by SuperLawyers.com and “Best of the Bar” by the San Diego Business Journal. Mr. Leonard’s law practice is focused on business, transactional, and corporate matters and he proudly provides legal services to business owners in San Diego and the surrounding communities. Like us on Facebook.