Contracts are how a business makes money and how it limits risk. Holmes Law drafts, reviews, and negotiates agreements as a Washington business contracts attorney for companies of all sizes: customer and vendor agreements, services and consulting contracts, supply and distribution agreements, independent contractor and employment-related agreements, confidentiality agreements, and the terms and conditions that govern a company’s everyday sales.
Washington contract law has features that businesses relocating from California, Idaho, Texas, or elsewhere often do not expect. Washington courts interpret contracts using a “context rule,” a statute turns one-sided attorney fee clauses into two-sided ones, the state’s Consumer Protection Act can reach business-to-business conduct, and Washington is about to become one of the most restrictive states in the country on noncompetition agreements. Michael Holmes is admitted in Washington and works with businesses statewide by video and phone. This page is general information to help you prepare for a consultation, not legal advice about any particular contract.
How Washington Courts Read Contracts
Washington follows the objective manifestation theory of contracts: the court looks for the parties’ intent as expressed in the words they used, not their unexpressed subjective intentions. Under Berg v. Hudesman, 115 Wn.2d 657 (1990), however, Washington courts may consider extrinsic evidence of the circumstances surrounding the making of the contract, known as the context rule, to determine the meaning of the words, even when the language does not appear ambiguous on its face. Extrinsic evidence may be used to interpret what was written, not to add to, contradict, or vary it.
The practical lesson for a Washington business contracts attorney is that definitions, recitals, and integration clauses matter. A contract that clearly states the parties’ purpose, defines its key terms, and includes a well-drafted integration clause leaves less room for a later argument about what the parties “really” meant. Every Washington contract also carries an implied duty of good faith and fair dealing in the performance of its specific terms, which cannot be used to create obligations the contract does not contain.
The Statute of Frauds: Which Contracts Must Be in Writing
Most business agreements are enforceable even if oral, but Washington’s general statute of frauds, RCW 19.36.010, requires a signed writing for certain categories, including:
- Agreements that by their terms cannot be performed within one year.
- Promises to answer for the debt, default, or misdoings of another person, such as a personal guaranty.
- Agreements made in consideration of marriage, other than mutual promises to marry.
- Agreements authorizing or employing an agent or broker to sell or purchase real estate for a commission.
Conveyances of real estate and contracts creating interests in land require a deed or written instrument under RCW 64.04.010. For sales of goods, the UCC statute of frauds discussed below applies. Even when a writing is not legally required, documenting the deal is almost always worth the effort.
UCC Article 2 as Adopted in Washington
Contracts for the sale of goods are governed by Article 2 of the Uniform Commercial Code, which Washington has adopted in Title 62A RCW. Important provisions include:
- Statute of frauds. Under RCW 62A.2-201, a contract for the sale of goods for $500 or more generally requires a writing sufficient to indicate a contract was made, signed by the party against whom enforcement is sought, subject to exceptions such as confirmations between merchants and specially manufactured goods.
- Battle of the forms. RCW 62A.2-207 governs what happens when a purchase order and an acknowledgment contain different terms. Businesses that rely on standard terms should know which terms will control and draft accordingly.
- Warranties. Implied warranties of merchantability and fitness for a particular purpose apply unless properly disclaimed; a disclaimer of merchantability must mention merchantability and, if written, be conspicuous.
- Limitations period. RCW 62A.2-725 sets a four-year limitations period for breach of a sales contract, which the parties may reduce by agreement to not less than one year but may not extend.
Service agreements, software development contracts, and mixed goods-and-services transactions require a closer look, since Article 2 may or may not apply depending on the predominant purpose of the transaction.
Limitations Periods for Washington Contract Claims
Washington’s general limitations periods for contract claims are set by statute:
- Written contracts: six years under RCW 4.16.040, which also applies to actions on accounts receivable arising in the ordinary course of business.
- Oral contracts and other obligations not in writing: three years under RCW 4.16.080(3).
- Sales of goods: four years under the UCC, as noted above, unless shortened by agreement.
Because the written-contract period is longer, businesses should document agreements, including amendments and change orders, in writing. A contract may shorten some limitations periods if the shortened period is reasonable, and the enforceability of such clauses should be reviewed case by case.
Choice of Law, Venue, and Dispute Resolution
Washington courts generally honor a contract’s choice of law under the approach of the Restatement (Second) of Conflict of Laws § 187, unless the chosen state has no substantial relationship to the parties or the transaction, or applying its law would violate a fundamental policy of a state with a materially greater interest. Forum selection clauses are also generally enforced unless enforcement would be unreasonable or unjust.
There are important Washington-specific exceptions. Under RCW 49.62.050, a noncompetition covenant with a Washington-based employee or independent contractor may not require the worker to litigate outside Washington, and it may not deprive the worker of the protection of Washington law. Other protective statutes may also limit how far a choice-of-law clause can take a Washington party.
Arbitration clauses are generally enforceable under the Federal Arbitration Act and Washington’s Uniform Arbitration Act, chapter 7.04A RCW. The contract should specify the rules, location, number of arbitrators, and whether the parties may seek provisional relief in court.
Noncompete and Nonsolicitation Law in Washington
Washington regulates noncompetition covenants through chapter 49.62 RCW, and the law is changing significantly.
The rules through June 29, 2027
Under current law, a noncompetition covenant with an employee is void unless the employee’s annual earnings exceed a threshold that the Department of Labor and Industries adjusts each year; for 2026, that threshold is $126,858.83 for employees and $317,147.09 for independent contractors. The employer must disclose the covenant’s terms in writing no later than the time of acceptance of the job offer, a noncompete lasting longer than 18 months is presumed unreasonable, and an employee laid off must generally receive continued base salary, less earnings from new employment, for the enforcement period. If a court finds that a covenant violates the statute, or reforms or rewrites one, the employer owes the worker the greater of actual damages or a $5,000 statutory penalty, plus attorney fees and costs, under RCW 49.62.080.
The near-total ban effective June 30, 2027
Legislation signed in March 2026 (ESHB 1155) makes noncompetition covenants with employees and independent contractors void and unenforceable beginning June 30, 2027, regardless of when they were signed. The definition of a noncompetition covenant is broad and reaches arrangements designed to restrict a former worker from competing, such as provisions restricting the servicing of customers. Employers must make reasonable efforts to notify current and former workers whose noncompetes remain in effect that those covenants are void, by October 1, 2027.
What remains permitted
Several types of covenants remain available, including confidentiality and trade secret protections, and covenants made in connection with the sale of a business’s goodwill or the acquisition or disposition of an ownership interest of at least one percent of the business. That is why buyout-related noncompetes belong in the equity documents; see WA buy-sell agreements. Narrow nonsolicitation agreements are also permitted if they restrict solicitation of employees or of current or prospective customers with whom the worker established or substantially developed a direct relationship, and, under the 2026 amendments, they may last no more than 18 months after the relationship ends. Franchise agreements may not restrict franchisees from soliciting or hiring each other’s employees under RCW 49.62.060.
Businesses with Washington employees or contractors should inventory existing agreements now, plan notice obligations, and rely more heavily on well-drafted confidentiality, invention assignment, and nonsolicitation provisions.
Indemnity and Limitation of Liability Clauses
Washington generally enforces negotiated risk allocation between businesses, subject to several limits:
- Construction indemnity. RCW 4.24.115 voids a construction indemnity provision to the extent it would indemnify a party against liability for damages caused by that party’s sole negligence, and where both parties are negligent it is enforceable only to the extent of the indemnitor’s negligence. A waiver of the indemnitor’s industrial insurance immunity under Title 51 RCW must be specifically negotiated to be effective.
- Exculpatory clauses. Releases of liability for future negligence are scrutinized. In Wagenblast v. Odessa School District, 110 Wn.2d 845 (1988), the Washington Supreme Court identified factors for when a release violates public policy, and Washington courts generally will not enforce releases for gross negligence.
- Clear language. Indemnity for a party’s own negligence must be stated clearly and unequivocally, and limitation-of-liability caps and consequential damages waivers should be conspicuous and specific.
Insurance requirements, additional insured status, and waivers of subrogation should be drafted to match the indemnity provisions so the risk allocation is actually funded.
Attorney Fee Clauses: Washington’s Reciprocity Statute
Under RCW 4.84.330, when a contract provides that attorney fees and costs incurred to enforce it will be awarded to one of the parties, the prevailing party, whether or not that party is the one named, is entitled to reasonable attorney fees. The statute cannot be waived. A one-sided fee clause written for your company’s benefit therefore protects the other side too. Businesses should decide deliberately whether they want a prevailing-party fee clause at all and draft it with this rule in mind.
Electronic Signatures and Electronic Records
Washington adopted the Uniform Electronic Transactions Act in chapter 1.80 RCW, enacted in 2020. A record or signature may not be denied legal effect solely because it is in electronic form, and an electronic record satisfies a legal requirement that a record be in writing, when the parties have agreed to conduct the transaction electronically. The federal E-SIGN Act provides overlapping protection. Some documents have separate requirements, such as recorded real estate documents, certain notices, and wills and trusts, which are governed by their own statutes. Businesses using e-signature platforms should keep audit trails that show who signed, when, and how the signer was authenticated.
Consumer Protection and Prompt Payment Statutes
Washington’s Consumer Protection Act, chapter 19.86 RCW, prohibits unfair or deceptive acts or practices in trade or commerce. Under Hangman Ridge Training Stables, Inc. v. Safeco Title Insurance Co., 105 Wn.2d 778 (1986), a private plaintiff must show an unfair or deceptive act, in trade or commerce, affecting the public interest, injury to business or property, and causation. The Act is not limited to consumer transactions, and a successful plaintiff may recover actual damages, attorney fees, and in some cases treble damages up to a statutory cap. Businesses should review advertising, automatic renewal practices, and standard form terms with the CPA in mind.
For work performed for public agencies, chapter 39.76 RCW requires timely payment by state and local government entities and provides for interest on late payments, subject to exceptions. Contractors and suppliers on public projects should also understand retainage and bond rights under the public works statutes. Private construction and supply relationships should rely on clear payment terms, late fees or interest, and lien and bond rights in the contract itself.
Frequently Asked Questions
Are noncompete agreements enforceable in Washington?
Through June 29, 2027, they are enforceable only for workers earning above the statutory thresholds and subject to detailed requirements. Beginning June 30, 2027, noncompetes with employees and independent contractors are void regardless of when signed, with exceptions including covenants tied to the sale of a business or an ownership interest of at least one percent.
How long do I have to sue for breach of a written contract in Washington?
Generally six years under RCW 4.16.040. Oral contracts carry a three-year period, and claims for breach of a contract for the sale of goods generally carry four years under the UCC unless shortened by agreement.
Is an electronic signature valid in Washington?
Yes, in most business transactions. Washington’s Uniform Electronic Transactions Act, chapter 1.80 RCW, gives electronic records and signatures legal effect when the parties have agreed to transact electronically, though some documents have their own formal requirements.
Our contract says only we recover attorney fees. Is that enforceable?
Under RCW 4.84.330, a contractual fee provision is applied reciprocally, so whichever party prevails in an action to enforce the contract may recover reasonable fees.
Can we choose another state’s law in our Washington contract?
Usually, if the chosen state has a substantial relationship to the parties or transaction and applying its law does not violate a fundamental Washington policy. Washington’s noncompete statute specifically forbids out-of-state law and venue for Washington workers.
Does the Consumer Protection Act apply to business-to-business deals?
It can. The Act reaches unfair or deceptive acts in trade or commerce that affect the public interest, and it is not limited to consumers.
Speak With a Washington Business Contracts Attorney
A contract drafted with Washington’s rules in mind can prevent a dispute or make one much easier to resolve. Holmes Law prepares and reviews customer, vendor, services, and restrictive covenant agreements for Washington businesses. Learn more on the Washington business law page, read about WA entity formation and WA operating and shareholder agreements, or contact Holmes Law to schedule a consultation.