Are Verbal Agreements Binding?
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Verbal agreements are contracts even though they were not memorialized in a writing. Assuming that the contract is valid, the verbal agreement between two parties is binding. However, verbal contracts may have unique complications to them.
Elements of a Contract
All contracts, whether written, verbal, express or implied must have certain elements in order to be valid. For example, there must be an offer and acceptance. This means that one party must propose an arrangement, such as buying a piece of furniture for $500, and the other party must accept it.
Another element is consideration. This means that both parties must give something up in exchange for the contract. This must be something that is of actual value, not a false recitation of consideration. There must be mutual assent or a meeting of the minds. The parties must be aware of the creation of the contract and the terms of the contract.
To get the court to enforce the contract, there must be no valid defense to enforcement, such as lack of mental capacity or the party being sued being a minor. Likewise, claiming that the contract was a result of fraud or duress may be able to prevent the contract from being enforceable.
One of the complications of a verbal agreement is the problem of enforcing it. The court must be able to extract the key terms of the agreement in order to enforce it, which can be difficult if the case evolves into a he-said, she-said account. The parties may not agree in court about what the terms of the contract were or even that there was a contract to begin with. It is easier for a court to enforce a contract when it can easily evaluate the paper in front of it. Therefore, the party moving for enforcement must be able to prove the terms of the contract to the satisfaction of the court.
Proving the Contract
The more difficult challenge to enforcing the contract is proving the existence of a verbal agreement. However, there may be several ways to help prove the existence of the contract. For example, the plaintiff may present evidence of him or her performing the services called for under the contract. Proof of payments can show that there was some sort of deal struck between the two parties.
If anyone else was present when the contract was made, he or she may be called as a witness. Written communications between the party that reference the agreement
Statute of Fraud
The statute of fraud requires that certain contracts be in writing in order to enforce them. Such contracts are described under state law. The Uniform Commercial Code governs contracts involving the sale of goods. It requires that contracts for the sale of goods over $500 to be in writing.
Under state law, a variety of other contracts may need to be in writing. These often include contracts regarding the sale or lease of land, contracts in contemplation of marriage, contracts promising to account for the debt of another and contracts that cannot be completed within one year.
Statute of Limitations
Another concern with verbal contracts is the statute of limitations. This is the time limit in which a lawsuit must be filed against the other party in order for the plaintiff to recover if there is a breach. Verbal contracts often have a much shorter statute of limitations associated with them in comparison to written contracts due to the need for fresher evidence and witness testimony.
While many agreements are initially reached pursuant to a verbal agreement, these contracts can be formalized in a written contract. By putting the contract in clear terms in writing, many of the problems associated with verbal contracts can be eliminated. A lawyer may be retained in order to draft or review a contract. He or she may make sure that certain terms are included in the contract that are designed to protect the client’s legal rights and interests. Additionally, a lawyer may help to explain the client’s obligations under the contract.
Read more on this legal issueWhat is the Statute of Frauds?
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What Are the Elements of a Contract?
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What is the Value of a Verbal Agreement
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.