Some of the questions I get asked most often surround the idea of vacation rental contracts. Should you require guests to bind to a contractual agreement? And if so, what kind of contract should it be? Electronic? Paper? Should they physically sign it, or should they just check a box that says "I have read and agree" to the contract? In the end, it comes down to what you, the vacation rental manager, feels most comfortable doing, and how much work you want to do, and how much and what kind of risk you are comfortable taking. As with most things: the options are a bit of a trade-off with each other.What is Legally Bullet-Proof?
It seems intuitively obvious to me that the most legally binding contract is one that is a physical hard-copy, signed by both parties at the same place and time, and witnessed and signed by a 3rd-party, who ideally is a notary public
. Everything short of that starts to lose legal validity. If the 3rd-party signed witness is not a notary public, it loses a little bit of validity. If the 3rd party witness doesn't sign it, but is willing to testify in a court of law, or by affidavit, it loses a bit more. If there is no 3rd party witness, even more validity is lost. And this continues, all the way down to a handshake. That's not to say the contract is not enforceable; we're just establishing that there is a spectrum of legal legitimacy, and you need to consider what is most appropriate and cost-effective in the realm of your vacation rental business.Physical, Paper Contracts
Physical, paper contracts are probably the most legally valid, but they are also the most tedious, and require the most work. First, you need to get the contract to the guest. You can email it (and Bookerville's Email Templates
and Automatic Emails
are a great way to do this), have the guest print it, sign it, and either FAX it back to you, or worse, mail it to your business address. This is a lot of work for both you and the guest. It requires you to file each contract physically somewhere. It requires the guest to get an envelope and stamp, and write your address carefully and get it into the mail. Moreover, sending things by postal mail can take days to reach you, and there's the risk it will get lost, or the guest didn't write the address correctly, etc. FAX'ing has improved somewhat over the years, but it's still not for the technically faint-of-heart, and also requires you and the guest to have FAX capability. Having to jump through such painstaking legal hoops will also almost certainly cause some of your prospects to shy away from your rental, and this is a risk that needs to be weighed with the benefits of a physical, signed hardcopy.Digital Contracts
Perhaps the best alternative - and certainly the one that is the most popular - is displaying a contract to the guest as part of the online booking process (or online confirmation of a manager-approved request). The process will require the guest to click a check-box indicating that they have read and agree to the digital contract that is pre-populated with all the information about you and your business, the guest, the rental property, the booking amounts, dates, payment schedule, etc. Better online booking software will capture the ip address
, timestamp, and other indicative information about the guest when they proceed with this, and this can be used to help your case in arbitrations. It is far easier for both you and the guest, and the contract can be automatically stored in the cloud for you or the guest to retrieve, save, or print for your own records. The pre-population of specific information about the guest, the property, the booking, etc. is also a huge time-saver, minimizes typos and mistakes, and further strengthens the contract because of the additional specificity. These benefits are what have propelled digital contracts to their preferred status among most vacation rental managers.Practical Reality
I imagine - in the grand scheme of things - that clicking a check-box on a browser is considered very low down on the totem pole of legal validity. Your mileage will vary, depending on the municipality of the arbitration, and a slew of other things, and of course you'll want to consult a lawyer to get the most precise legal explanation of this practice.
But that's not the true leverage of contracts like this: the chances of any booking going to court are almost nil. The real value of them is to communicate with guests, and set expectations; to perhaps sober them up a bit with some legal language so that they are more likely to treat your rentals properly and with respect, and to spell out the terms of the transaction. To this end, contracts - even digital ones - do seem to be rather effective, even if they won't necessarily stand up to the most rigorous legal scrutiny.
John Amato, November 7, 2014:
According to this CNN article, there was a law passed in 2000 that makes clicking an "I agree" checkbox just as legally binding as signing a physical contract.
"According to New York technology attorney Mark Grossman, selecting "Agree" serves as an electronic signature, due to a law passed in 2000. It has the same validity as typing your name in an e-mail or signing a document using a pen."
If true, doesn't this call into question the sanity of using something so much more expensive, tedious, and likely to drop sales as Docusign?
Anyone care to comment?