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California Contracts: The “Intent to Be Bound” Requirement

It is often recited that, for a contract to be enforceable here in California, there must be an offer, acceptance, consideration, and a meeting of the minds or a mutual understanding of the obligations to be undertaken. What is not so often recited is that the acceptance must include the idea that the person intends to be bound by the agreement and that he or she or the business entity understands that legal consequences are intended. It is this intent to be bound that often distinguishes legally enforceable contracts from social obligations. If, for example, you are invited to a friend’s house party and you say “yes,” in theory, one could argue a contract has been formed. However, generally speaking, we do not intend to be bound legally by social engagements and we do not expect legal consequences to flow from breach of those engagements.

San Diego Corporate Law: What is Needed?

In general, the most common method of indicating one’s intent to be bound is by signing the contract at issue. In the same manner, on the flip side, failure to sign a document that is presented for signature is an indication that one does not intend to be bound by the contract. A recent unpublished decision from the California Court of Appeals illustrates the point. See Doan v. Nhan Hoa Comprehensive Health Care Clinic, Inc., Case No. G055323 (Cal. App. 4th Dist. November 26, 2018). That case involved an employee handbook. Among the provisions in the handbook were two pages entitled “Mandatory Arbitration to Settle All Claims.” The second page from the handbook contained lines for a date and a signature from a new employee. In the Doan case, both the date and the signature lines were blank. Doan signed other documents when he started working for the clinic, but not the two pages with respect to arbitration. Relying on the other documents and despite the failure of Doan to sign the page related to mandatory arbitration, the employer attempted to compel arbitration.

The trial court rejected the clinic’s legal arguments. Doan could not be compelled to arbitrate because none of the documents signed by Doan referenced arbitration and Doan had not signed the two-page agreement to arbitrate. The Court of Appeals affirmed.

The court noted that most contracts are explicit agreements made when the parties sign the contract. The court acknowledged that contracts can be implied by conduct or other evidence of an intent to be bound. Pursuant to the Civil Code, an implied contract is an actual agreement between the parties, “the existence and terms of which are manifested by conduct.” See Cal. Civ. Code, § 1621.

However, there was no evidence presented in the Doan case showing consent by conduct. Indeed, quite the opposite. The failure to sign the arbitration agreement was an indication that Mr. Doan did not intend to be bound by the agreement.

Contact San Diego Corporate Law Today

For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard provides a full panoply of legal services for San Diego businesses, including drafting employment contracts and handbooks. Call Mr. Leonard at (858) 483-9200 today or contact him via email.