Oral Contracts
One question I get asked quite frequently is whether or not an oral agreement with another party can be enforced. Whilst many people assume the answer is no, because they’re always hung up on the phrase “get it in writing,” that’s not actually true. Oral Contracts can be enforced against the other party(ies) to the agreement as long as they don’t violate the statute of frauds. The statute of frauds requires that the following type of contracts be in writing:
Any promises made in connection with marriage;
Contracts that cannot be completed in less than one year;
Contracts for the sale of land. (Leases need not be covered unless they're of a year or more in length);
Promises to pay an estate’s debt from the personal funds of the executor. (However, promises to pay such debt from the estate's funds are not subject to the statute of frauds);
Contracts for the sale of goods above $500; and
A surety, I.e. a contract in which one person promises to pay the debt of another person.
The statute of frauds does not require an elaborately written contract in order to have the requirement of a signed, witten writing satisfied. The document need only:
Be in writing. Whether this is a quick note or bullet-point list it will suffice.
The subject of the contract must be identified in an easily understood manner, such as referencing real estate property by its address or describing the make and model of a product. Nicknames and other cryptic identification should be avoided.
The essential terms must be spelled out—including the exact nature of the goods or services, and the agreed price(s) or other considerations.
Ideally, both parties should sign the agreement, but only the party actually being required to do something by the contract is required to sign it.
Other oral contracts can be enforced, without being in writing. Despite this fact, whether a contract is required to be in writing or not, you should always aim to get it written down and signed. A contract not only proves the existence of the agreement, but also specifies the terms of the engagement including conditions on performance, prerequisites to performance, minimum standards of services or products, cost associated with the services or products, etc. All of these details protect both parties to the contract, because they eliminate the debate on such topics in the event a disagreement should ever arise. Moreover, to prove the existence of an oral agreement may be difficult if performance by either party has not commenced and there are no written documents or references to such an agreement. Conversely, in some cases, even contracts that are required to be in writing will be enforced due to special circumstances. Such cases generally involve the partial performance by either party.
Partial performance may prove the existence of an unwritten agreement. For examples, in cases where one party has rendered payment, whether full or partial, for prospective goods or services to be rendered by the other party. If an agreement did not exist, then what would be the purpose of such payment? Therefore, it may be assumed that an agreement did exist for services or goods. Whether or not a written agreement was required to be signed by the parties per the statute of frauds, partial performance will likely result in the contract being enforced, in order to prevent unjust enrichment.
Unjust enrichment is another concept which may be used to argue that an agreement did exist. The concept focuses on whether one party has benefited from the actions or inactions of another, and whether or not they have been compensated for it in exchange. A good example of such a scenario is a painter hired to paint a homeowners house. If a written contract doesn’t exist, but the painter painted the homeowner’s house, the homeowner’s failure to pay for such a service would be considered unjust enrichment, or, in other words, an unfair benefit to the homeowner. Not compensating the painter in this situation would leave the homeowner with all of the benefit, I.e. the painted house, without any of the burden, I.e. the cost of the service.
Whatever your situation, it’s best to contact an attorney to determine whether or not you’ve formed a valid contract or have any obligations. Contact us today and we can help you with this assessment.
