Is a Sales Contract Legal If Just Initialed & Not Signed?
The three elements that must be present to form a valid contract are an offer, an acceptance and a mutual exchange of value, known as "consideration." Most sales contracts are executed by the signatures of both parties, which are meant to indicate that both parties consent to the stated terms. A sales contract that has been initialed but not signed may or may not be enforced, depending on the circumstances.
Although initials may indicate consent to the terms of the contract, if the initials appear only next to certain terms they might indicate only that the party consented to those particular terms. Initials next to certain terms might also indicate that the contract was a preliminary draft version used for negotiation purposes, and that the initialing party was simply indicating provisional assent to certain terms. Initials appearing in the same corner of every page might indicate that the initialing party was simply confirming that he read every page of the contract.
If a lawsuit is filed on the basis of a contract that has only been initialed, the court will inquire into whether there has been an actual "meeting of the minds" between the two parties with respect to the terms of the contract, and whether the initials were meant to indicate an intention to be legally bound by the terms of the contract. Although this is a subjective question, the answer must be established using objective evidence. Normally, a court will not look beyond the four corners of a contract to answer the question of consent; however, because of the ambiguity introduced by using initials instead of signatures, it may allow extrinsic evidence to be admitted to resolve the question.
The format of the contract itself might be relevant to the question of consent. If, for example, the contract did not contain a signature line, the absence of a full signature would not be surprising and the presence of initials would be more likely to indicate consent. The behavior of a party might also indicate consent -- if a seller initialed the contract and promptly shipped goods to the buyer. The seller's act of shipping the goods might be considered evidence that his initials were meant to indicate consent to the terms of the contract.
The Statute of Frauds, a version of which has been enacted by every U.S. state, requires contracts to be in writing if they involve the sale of real estate or goods priced at more than $500. If the Statute of Frauds applies, no evidence of a verbal agreement may be presented to prove the existence of the contract. If initials alone are not considered written evidence of consent to the terms of the contract, the contract cannot be enforced against a party who only initials it.