Does there really exist such thing as "no contract" when doing business with other party?

Question

Sales persons are sometimes advertising their service as "contract free", so that they would get a better chance to convince you to sign up for their service. I guess the reason why this works is because to average person "contract free" typically means that you don't have to read fine print on a written contract that most of the time works against you.

However, isn't this misleading advertising to claim that there is "no contract", because there always will be a contract - either verbal or written on a paper under different title (e.g. Application Form, "Unicorn tears")?

Based on answer I received here, the person claimed that it does not matter what is the title of the document - so document with title "Application Form" could incorporate another document via reference that specifies terms. Effectively you actually end up having a contract, but the only difference is that you did not explicitly sign the referenced document and did not have a chance to read it; and this works against you. Or another person confirmed here that there does not have to be any paper signed at all for judge to think that there was a contract in the first place. Also, another person told here that the terms don't need to explicitly be mentioned in the first place, if price (and possibly late fees) were omitted from contract, then judge will figure out what is fair.

What would judge do if you were able to prove that other party claimed that their service is "contract free"?

If sales person was honest would he have to explain to the other party that "contract free" actually means:

You know our service is only "written contract fee" and not "contract free". However, this is the exact reason why you would have to be really dumb to enter into business with us orally or just via Application Form, because now instead of just dealing with the fine print issue that you would have had with written contract, now you will also have to deal with incorporation by reference issue where we can incorporate terms and conditions from Application Form into our website or somewhere else; also, now instead of knowing what are the exact fees (e.g. ETF, late fees) that we would charge from you we will simply charge whatever we think is "fair amount". If you disagree with the amount of fees we charge, then no worries judge will decide what is fair for you. However, remember, just because that we did not disclose such fees in contract it does not mean that we can't charge them from you.

Does monologue from "honest" sales guy above really explains how our legal system works, if there is "no contract"? Note that this question is only asked from legal point of view and not from building good relationship point of view.

I will wait for multiple answers before accepting the right one. I will give preference to that answer that will be backed up with precedent case where judge discusses meaning of "no contract".

Answer 1

Let's say I buy a phone. Typically you can buy a phone with something that is advertised as "no contract" or for example "with a 24 month contract".

In reality, "no contract" means "we have a contract where you hand over the cash, and the phone company hands over the phone, and there are various guarantees that are either implied or explicit, but there are no terms in the contract that force you to hand over money to the phone company beyond payment for the phone in the future if you don't want to".

So there is a contract, but the contract is such that you as the customer have no obligations towards the seller once you have paid for the goods.

"No contract" would happen for gifts, or as an example if you download open source software in the USA for free.

There will be a difference between a "no contract" contract between business and consumer or between two businesses. Most countries have consumer protection laws so if a deal is advertised as "no contract" and the business demands further payments, they will likely lose. Between two businesses, each side is fully responsible to study the actual contract terms.

Answer 2

Whenever I have heard the term "no contract" it really meant "no obligation" which from my POV is a reasonably accurate synonym.

For example, cell phone companies often try to sign up new subscribers and put them on a two year contract to use their wireless data services. However, I have seen companies offer "no contract" (i.e., no obligation to use their services) if you are a former customer of a different wireless company.

Similar example. People often use the term "no lease" when what they mean is there is a month-to-month lease instead of a longer term one.

Answer 3

There are contract free transactions; they are called gifts. When one person provides consideration to another with no legal entitlement to consideration in return; when you give money to the Red Cross, for example.

Alternatively, people can make reciprocal promises without the intent for those promises to be legally binding; that is, enforcement is by honor alone. Courts will not, indeed cannot, interfere in such an arrangement. If someone reneges the only censure comes from their own conscience.

If this is not the type of arrangement you are thinking of then the legal term for it is "scam" or "con". These things are illegal but people do them because they are lucrative and the odds of getting caught are low and the penalties are laughably small when compared to other "get rich schemes" like armed robbery.

Answer 4

I'm not a lawyer.

I think many of those are contracts and therefore you can have obligations under them, whatever they're called or not and regardless of duration (e.g., one femtosecond or five centuries). Many contracts can be entirely verbal; a case was won by a business which spent money for a factory because of a B2B handshake agreement to buy products (therefore be careful about shaking hands). A conflict between written terms and verbal statements generally is decided in favor of what was written and signed, even with an individual and even if the exclusion of the verbal is not explicitly in writing; if the written price is higher than the verbal, the written price controls. A court could recognize a contract based on the proof submitted by the parties. Contract-free should mean that there's no contract but it probably doesn't if everything constituting a contract is present, which is tough on lay people but is probably law. There can be relationships other than gifts that are contracts even though they're not called contracts; and some noncontracts are still binding. (@Jonny and also @gnasher729, @Mowzer, and @Dale M.)

Whether calling a contract not a contract is misleading advertising, while I think it generally is, may depend on local law on consumer rights and many interstate firms may be exempt from some local law if pre-empted.

Whether you had a chance to read it is a separate matter. You might have to prove that you had no choice but to agree and that you were forbidden to read the document that was incorporated by reference even though you asked to read it. Having no choice but to sign is often an issue covered by duress, like having a gun pointed at your head, but needing a phone because without it you can't get a job (let's say) is not usually duress (maybe you can get some other job paying any wage or get welfare). Contracts are generally presumed as voluntarily entered into and therefore the presumption in court is against whoever agreed without reading. There can be an issue of quality of notice, but it rarely comes up, which tells me that the standard is likely high. There may be issues of statements made or omitted inducing you to agree when otherwise you would not have, but omission is a harder case. Incorporation by reference is where what you agree to incorporates something else by reference, not the other way around. Reading contracts is not always easy and the law gives little relief for that.

The store shelf relationship (also @joshua and @bdsl) probably is a contract that is fully performed once the goods are in the buyer's hands and the money is paid. Taking the goods and not yet paying for them is likely a violation of the contract that's violated if you walk past a certain point (say, the door) without paying (besides being a criminal issue).

Quite a bit of what's done is legal even if it makes for a bad business relationship.

The reason this site is not for legal advice when sites about computers are for advice on how to use, buy, fix, etc. a computer is likely because of law on practicing law and there's a box on the right side of these pages saying it's not for legal advice. What's a request for legal advice will generally be interpreted widely, not narrowly, so ask generically and omit facts not needed for a generic question (albeit at a risk of an answer being off-point). (Also @Patrick87.)

There are books on law, although many of the most reliable ones are harder for most nonlawyers to understand, and possibly law offices that coach for less than the cost of representation, although they also do less. A judicial precedent depends not only on law applied and facts applied to but also which court; many precedents are only persuasive, not binding, for the reader's case.