Does a valid contract require a lawyer?

Factual Questions
1

My ex-husband and I (who are on amiable terms) jointly own the house in which I live. We plan to sell it next year. In the meantime, I’ve agreed to lend him a sum a money to help with his application to emigrate overseas. The idea is that when we sell the house, I’ll get back the money I lent, plus suitable interest, out of his half of the proceeds from the house.

Obviously, we need to get that arrangement in writing before any money changes hands. My question is: If we write up a contract that’s mutually agreeable and both sign it in the presence of a notary, does that make it legally binding, such that if anything went wrong later, one or the other of us could sue for breach of contract? Or does it need to be drawn up by a lawyer and then signed to be binding?

I’m not expecting extensive free legal advise here (you folks wouldn’t make much of a living if you gave away all of your information for free). But a quick answer—or the firsthand view from someone who’s done this—would be greatly appreciated.

Thanks!

2

Short answer: No.

Long answer: having a lawyer check it up to make sure it doesn’t break any laws may be a good idea. And the usual reason people bring lawyers is not because they’re “required” but because people tend to be real bad at negotiation (and prefer to pay someone else to cut throats for them).

3

IANAL, but contracts do not need to be drafted by a lawyer to be legally binding. However, on an important subject like a substantial loan, with various possible future contingencies, you are probably better off getting lawyers (one for each of you, since, even though you are on good terms, you have conflicting interests). You may be advised to have a mortgage to secure the loan, for example.

4

At some Office Supply stores, you can buy legal documents with most of the "boilerplate"already there, and you fil in the blanks- without a lawyer. That would include an IOU.

However, once such things as an IOU get related to a Real Estate transaction, then you should consult an attorney.

5

Just an anecdote. I was considering using one of those software packages to do my will. I discovered that there are specific laws in different states that affect how it should be written, but the software didn’t know that. I used a lawyer and am very glad I did. I would not use off-the-shelf documents for any but the most simple agreements. A lot of agreements that sound simple can get complicated if unanticipated circumstances arise, like what happens if he emigrates overseas before the house sells? Etc., etc.

So I join the crowd that says you don’t need a lawyer to make it legally binding but it’s a good idea. Giles makes a very important point about conflicting interests.

6

I agree with everyone that says a lawyer for something of this magnitude is just good sense. Remember that a contract protects BOTH parties as it clearly spells out what is expected from each. If you do it yourself who knows what loopholes could get missed or misunderstandings might occur. When I signed my mortgage I must’ve put my signature (or initials) on a 100 pages of stuff. I asked my attorney if this was all really necessary and they said every paper in there is because somewhere, somewhen, someone skated through a loophole so the mortgage company seemed to have a piece of paper covering every possible event.

That said you can form a legal contract simply. You can write an IOU on a paper napkin if you want. Hell, even verbal contracts can be formed. As long as it meets certain criteria it could in theory be taken to court to have the person pay. Not saying this is a good idea but it can be that simple.

7

Like Nava said, “no” is the correct short answer, but it also depends on what the circumstances of the loan are, and any additional requirements of your jurisdiction.

The caveat is, and, again, this is not legal advice, you should consult an attorney because as DrDeth has stated, this involves property. Your state may have special contracting terms and provisions which may be needed to be placed in the agreement, or you may need to record some sort of lien or encumberance with the title or at a title company/office, and/or secreatary of state. This all depends on how you draw up the contract, and more importantly, if there are any other creditors on the mortgage of the house or if the house is already being used as collateral in some other type of loan. This situation could fall under the UCC (more later), specifically an Article 9 transaction, where you are, in effect, offering a loan or some type of secured transaction. If this is the case, then you need to complete a further step and “prefect” the transaction (i.e. filing a financing statement/placing liens or encumberances on the title).

The UCC is the Uniform Commerical Code. It provides certain acts, laws, guidance, procedures, what have you to harmonize commerical transactions and laws of sale amongst the 50 states, and is essentially the law, to the extent it is codified by the state legislature.

To give you one such (overtly simple) example, if I’m selling software, and you’re buying it, you giving me the money in exchange for the software is covered by the UCC (Art 2, to be specific). It standardizes the offer, acceptance, and any warranties that go along with the transaction, such that, if there any issues with the transaction, the means by which the transaction occured will be covered

Anyway, you really should see a lawyer, and quit listen to my rambling. I’m much more coherent after a full day’s rest.

8

As others have said, you don’t need a lawyer to make a valid contract. You also don’t need a notary.

In this particular case, you will want a promissory note. Although you might find a suitable form online, a lawyer will help you think through the terms. Do you want the note secured? What interest rate (is the rate legal, does it compound, is it paid periodically or does it accrue through the maturity date)? What are the remedies upon default?

But of course I am not your lawyer and this is not legal advice, and the other usual disclaimers…

9

I presume because a sale of a house is involved, we are talking about a substantial amount of money, see a lawyer.