Sealed By A Handshake – Binding And Enforceable Oral Contracts

In the old days, people would negotiate a contract by discussing each side’s objectives and concerns, informally ironing out the details, and shaking hands to seal the deal.  Oral contracts were quite common.  Nowadays, it’s often said: “get everything in writing.”  In contrast to simpler times, even the most straightforward agreements seem to require lengthy contracts chock-full of legalese that neither party fully understands. However, this is not because verbal agreements aren’t still legally enforceable.  They are.  If you are weary of long complicated contracts and yearn for the straightforward deals of simpler times, you may be considering entering into a verbal contract.  While by no means attempting to talk you out of such an old school approach, this post provides pertinent information to consider regarding enforceable oral contracts.  The main issue to keep in mind if you do decide to enter into a verbal agreement is the potential difficulty of proving the existence and terms of the oral contract.

An oral contract is a binding verbal agreement without the parties’ memorializing the agreement in writing.  To be legally enforceable, the terms of an oral contract must be definite, certain, and clear as to all the essential terms.  The moment the parties agree upon definite terms and agree to be bound by such terms, the agreement becomes legally binding.  For example, when someone commits to provide you a service for a certain amount of money, and you agree to pay a certain amount of money in return, you are then obligated to pay for the completed service and the other party is obligated to perform the service.  For oral contracts, to address evidentiary concerns if a problem later arises, it’s best to enlist a neutral witness (or better yet, multiple neutral witnesses) before moving forward with an oral contract.  A neutral witness needs to be able to testify under oath that she heard the terms of the agreement between the parties and witnessed both parties agree to such terms.

However, be aware, there are certain types of contracts that must be in writing to be legally enforceable. Such contracts fall within the legal doctrine known as the statute of frauds.  The purpose of the statute of frauds is to avoid problems inherent to oral contracts (i.e. disputes about the terms of an agreement) for those agreements deemed the most significant and the most susceptible to fraud.  The most common types of agreements which must be in writing are those regarding marriage, real estate, the sale of tangible goods worth more than $500, repayment of the debts of another, and any agreement which would take more than a year to complete.

In today’s world of overly complex contracts, for certain agreements a simple oral contract may be what each party is looking for.  But this option should be exercised with great caution and each party should be aware of the potential pitfalls of oral contracts. Otherwise, the oral contract may not be worth the paper it’s not written on.

 

Truckee Personal Injury Attorney

David W. Wolfe is an associate attorney with Porter Simon licensed in California, with offices in Truckee and Tahoe City, California, and Reno, Nevada.

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The content contained and opinions expressed in this blog are solely those of the author. This blog contains content and opinions concerning the law generally, and is not intended to constitute legal advice or to create any attorney‑client relationship with the reader. The reader should consult with an attorney about any specific legal issues prior to embarking on any course of action or inaction involving legal matters. The author makes no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of this blog and expressly disclaims liability for any errors and omissions.