Is a Verbal Contract Enforceable in California?

Verbal contracts are enforceable in California, with few exceptions. One method of proving an oral contract is to look at party’s conduct, activities, and action taken after the verbal contract was made.

It is usually more of a challenge to enforce a verbal agreement in the state of California. However, these verbal contracts remain legally binding in most situations.

When individuals enter into a contract, both parties are legally responsible for upholding the deal. When contracts are written, the deal’s specific tenets are established based on the contract’s language. However, when two parties make a verbal agreement, the details are sometimes not as clear. Based on that fact, it is usually more challenging to enforce a verbal agreement in California than a written one. Yet, verbal contracts in California remain legally binding in the majority of situations.

What Kinds of Verbal Contracts Are Enforceable in California?

Katie is selling her 2010 Jeep Wrangler in Mission Beach, San Diego, and placed an ad in the paper. The next day, Diana comes to her house to check out the car. Diana tells Katie that she loves the car, and Katie tells her that the Jeep is hers if she wants it for a price tag of $12 thousand.

Diana says she wants to buy the car, and the two women shake hands. Katie offers to draw up a bill of sale, but Diana is rushing to pick up her children at school.

Katie tells Diana that Diana can pick up the Jeep tomorrow since she still must clean it and get her belongings out of it. She asks if Diana will pay her cash for half of the agreed-upon price, $6 thousand, before she leaves to pick up her kids.

Diana pays Katie in cash, and the two women shake hands, making a casual verbal agreement on the Jeep’s sale. The next day, Diana heads to Katie’s house to pick up the Jeep, but the car is gone.

Katie tells Diana that she sold it the night before to a man named Tex for $15 thousand. Since there was no contract, Katie said she simply sold it to the higher bidder. Then, she tells a disappointed Diana that she will not be able to give her the $6 thousand back because she is not required to by law.

Outrage, Diana tells Katie that she will contact a lawyer and get her money back. However, on the way home, Diana is angry at herself. She knew that she should have signed a written contract and checked the terms of the deal. She also knows that while she is owed back $6 thousand, it might be difficult to prove that she paid Katie since there are no receipts, and it is her word against Katie’s.

In fact, many individuals believe that contracts must be “put in writing” to be effectively enforced, and in some ways, they are correct. Documenting the terms of a deal in writing is never a bad idea because a signed document provides strong evidence that a contract between two parties exists.

Yet, while parties must put certain types of contracts in writing to be enforced, some verbal contracts are legally binding in California.

Verbal agreements occur more in an uncertain or “gray” area than most written agreements. Written contracts consist of the party’s duties, stakes, and responsibilities, and this information is spelled out in writing.

Verbal contracts are based on word of mouth and are subject to “he said, she said.” This widely-used phrase means that it can prove difficult for the court to rule on the verbal agreement since the individuals must remember some of the terms of the deal. Verbal agreements need proof to be enforced in court, such as:

Proof that the oral contract existed
Proof that the other party breached their side of the deal; if so

For the court to consider them legally binding, some contracts must appear in written form. The agreement must be in writing if the contract is for goods with a value over $500. Also, California state law dictates requirements for certain types of agreements. These contracts must be written and cannot be verbal in California:

A contract promising to satisfy an individual’s debts
A legally binding land lease
A contract that takes more than a year to fulfill
A contract of marriage

Verbal agreements also require special statutes of limitations as compared to written contracts. When an individual seeks to file a claim against someone for a breach of a verbal contract, they have less time to do so. Individuals must understand the statute of limitations attributed to their specific type of contract.

For example, Pete is in a car accident on the highway outside San Francisco. After the fender bender, Pete and Mark shake hands and agree to contact each other with their insurance information. However, they do not want to wait around on the shoulder of the busy highway, and Pete is late for a meeting.

Pete and Mark have made a verbal contract, but they should also contact an experienced accident lawyer in San Francisco, just in case one chooses to break the verbal agreement.

When individuals enter a legal agreement, we recommend that they do so in writing. A written, signed contract helps to protect individuals from disputes and breaches that may occur in the future. However, some people are unable to put their contracts in writing. When this occurs, there are specific steps people can take to ensure that their verbal agreements are valid, legal, and lasting.

Use Key Terms:

Parties should word all agreements in clear, simple phrasing. The court must understand the terms of the deal, as opposed to attempting to deal with conjecture and hearsay. Therefore, ensure the deal’s terms are straightforward and that each party understands all the words and phrases clearly.

Circumstances Must Be Valid:

If one party involved in the agreement is a minor, wrongfully or illegally coerced, or is mentally impaired, the court will not uphold the contract.

Mutual Assent

Parties often call verbal contracts “meetings of the minds,” suggesting that both parties agree to the terms.

Fair Consideration:

For any contract to work, both groups must exchange something of value.

Offer and Acceptance:

One party also has to propose an agreement, and the other party must accept the deal’s terms. Both offer and acceptance must have occurred between the parties.

Maintain Proof of the Agreement

Verbal agreements require proof in some form. Both parties should keep track of this documented proof, which could come from services performed, paystubs, invoices, or other documents.

Have a Written Contract

When it is possible, individuals should translate verbal contracts into written contracts in California. This act will make enforcing the contract much easier in a court of law. However, if this is impossible, individuals should keep a record of all written communications between themselves and the alternate party.

To help translate a verbal contract to a written contract, or for questions about verbal contracts, individuals should consult with contract attorneys.

What Is California’s Statute of Frauds?

In California, the Statute of Frauds lists the types of contracts that, to be enforced, must be written or recorded. These contracts include agreements for:

The sale of personal property for more than $5,000
The sale of real estate
A service that is unable to be performed during the lifespan of the person who promises to perform it
A property mortgage
A sale of goods over $500
A real estate sale or lease for longer than a year involving an agent or broker as a third party
Answering the debt or default of another person
A contract that cannot be finished in one year (for example, a job lasting 18 or 22 months)
Lending over $100,000 or providing the same amount of credit, not used for household, family, or individual expenses

Alternate contracts may be enforceable even if the parties only recorded them verbally. However, it can be challenging to prove that the oral contract existed.

Returning to the example of Diana and Katie, Diana’s lawyer is tasked with proving to the court that Diana paid Katie half the price of the Jeep, $6 thousand. However, Diana has a receipt from her bank for withdrawing the cash, and her lawyer hopes to show that Katie deposited the cash into her account that night.

Are There Exceptions to the California Statute of Frauds?

If two parties make an agreement but do not both sign a contract, there exist other ways to enforce the agreement. In California, an individual may be able to legitimize the contract if:

One party admits to the verbal contract in court testimony or pleading.
Texts or phone records illustrate the contract.
The party who has not enforced the contract sends written proof of the contract.
The party trying to enforce the contract sends written proof within five days without any written objection.
There is evidence of electronic communication, such as a text or call, that points to the existence of the contract.

When Should Individuals Contact an Attorney About Verbal Contracts?

For Diana, six thousand dollars was no small sum, and she contacted an experienced attorney and took Katie to court. Ultimately, Katie admitted to the verbal contract, and Diana was able to collect more than the damages owed to her based on the undue emotional stress she experienced. Diana vowed never to buy a car from an unlicensed seller again.

It made sense for Diana to contact a lawyer for help with her case. Verbal contracts often challenge the parties who use them but are enforceable in the specific situations outlined here. However, using a written contract whenever possible makes sense to avoid disagreements and other conflicts. Generally, when entering any type of deal or contract with another party, be careful and sensible.

For help with verbal contracts in California and all other questions, contact the experienced attorneys at Nakase Wade—we look forward to hearing from you.

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