How Do You Enforce an Oral Contract?

Business people often do enter into a contract verbally. The oral contract is enforceable when the aggrieved party shows that an offer was made and accepted, there was value for all parties, and the aggrieved party sustained monetary damages.

How Do You Enforce an Oral Contract?

Contrary to popular belief, verbal agreements are enforceable if enough evidence exists. However, written contracts are considered highly preferable. Learn more about what is a breach of contract.

Are Verbal Agreements Enforceable?

An Example: Oral Agreements

Josh and Bryan are old friends from high school and are now in their 40s. Both men live in Oceanside, CA., and are avid surfers.

One day, Josh and Brian are at the beach, and Josh tells Bryan that Josh is thinking about buying a boat. Josh explains that his wife Jackie wants a boat and that his surfboard collection is worth about $25,000, the approximate cost of the boat she wants.

Bryan, ever the “good friend,” tells Josh that he will buy all his surfboards for $25,000, and then Josh can buy the boat. Bryan knows that Josh’s 42 surfboards are worth far more than $25,000 and sees this as a deal he cannot pass up.

Josh says, “sounds good to me,” Bryan and Josh shake hands. Although they have not written anything, Bryan assumes that the verbal agreement will move forward. But Bryan also wonders: if Josh realizes that the deal is not completely fair to him, is the two old friends’ oral contract enforceable?

Oral agreements for surfboards or anything else are generally not in the best interests of those involved. Verbal contracts often have nothing in writing to anchor them and sometimes lack witnesses. Therefore, these deals—sometimes known as ‘handshake agreements’—often devolve into “he said, she said” disagreements.

However, if the parties supply enough evidence, the courts will usually enforce a verbal contract. Often, these contracts depend on:

What was said
How it was said
If anyone was there to witness the agreement

What is the Statute of Frauds?

The Statute of Frauds is a general contract principle of law. The principle is a specific exception to the idea that verbal contracts are enforceable. The purpose of the Statute is to prevent deceitful conduct among the parties involved and is usually applied when verbal agreements feature long timelines or elevated stakes.

In general terms, and as used in most states, the Statute of Frauds specifies which situations and agreements require a written contract. The Statute includes:

Sale of real estate
Property transfers following the death of an owner
Agreements to pay another’s substantial debt
Real estate leases that last over one year
Contracts that will take longer than one year to complete
Contracts that will be longer than one or both parties’ lifetimes
Contracts for over a certain amount of money (differs by state)

The court usually will not enforce verbal agreements if they fit into one of these categories. Instead of a verbal agreement, these situations require documentation that both parties sign.

There also exist exceptions to the Statute of Frauds. If the verbal agreement lands within the terms of the Statute of Frauds, it can still be enforced if:

One party partially conformed to its terms
The plaintiff relied on the defendant’s promise and, as a result, suffered a detrimental action or condition.

The plaintiff in the case must provide the evidence and convince the court.

Since our focus is California, let’s look at the specific terms of the Statute of Frauds in California.

What Defines the Statute of Frauds in California?

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 contract that cannot be finished in one year (for example, a job lasting 18 or 22 months)
A service that is unable to be performed during the lifespan of the person who promises to perform it
A property mortgage
Lending over $100,000 or providing the same amount of credit, not used for household, family, or individual expenses
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

Returning to our example of Bryan, Josh, and the purportedly “sold” surfboards, we see that the first entry on this list applies to the sale of the boards. Even if Josh agreed to the specifics of the deal with Bryan, the exchange need not be honored if the two friends did not put anything down in writing. This discrepancy is because the sale of Josh’s surfboard collection exceeds $5,000 and is classified as personal property.

If Bryan and Josh had drawn up a bill of sale, a receipt, or another document proving the sale of the boards, and both signed it, the deal would be valid. However, as it stands, Josh is not held to the terms of the deal.

How Can Parties Be Sure that a Verbal Agreement is Legally Binding?

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 Clear 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.

Honor Valid Circumstances:

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 must also propose an agreement, and the other 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.

When Should a Written Contract Be Used?

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 contact an experienced attorney.

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

What Types of Verbal Contracts are Enforceable in California?

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

However, 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 “gray” areas 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 other party breached their side of the deal
Proof that the oral contract existed

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.

Let’s say that Bryan and Josh made the same deal, but it was that Bryan pays Josh $3,000 for a portion of his surfboard collection. The two men did not sign anything, but Josh said, “I accept,” and they shook hands. Also, Bryan’s friend Ryan witnessed the entire exchange, including Bryan paying Josh the $3,000 check.

Let’s say that Josh disputed this agreement and refused to sell Bryan his surfboards. If this particular oral agreement went to court and Ryan testified, Bryan could win the right to buy the surfboards. Bryan’s case would be stronger if he had some documented evidence from the exchange, such as a copy of the check or a record of paying Josh $3,000.

How Can The Terms of Oral Agreements Be Proven?

If Josh and Bryan find they need to take their surfboard disagreement to court, they will both need to testify about the terms of the deal based on their memories. Proving the terms of an oral agreement usually relies on:

Testimony from both parties about the contract
Details about how both parties conducted themselves before the deal was made as well as after

“He Said, She Said” Problems

Sometimes, testimony becomes a case of “he said, she said.” When this occurs, the contradictions in one or both parties’ telling of the events become very important.

For example, if Josh first states that the conversation about the surfboard took place on the beach. Then, Josh changed the amount of money that Bryan paid him. Either his memory is very foggy, or he is changing his story based on his preference.

The Importance of the Parties’ Conduct

The way both parties acted before and after the disputed deal is often one of the most important case details. For example, if the parties exchanged money, this is a strong sign that the deal occurred. Likewise, if a service or an item was provided to one party based on a payment, this is also an important detail backing up the deal’s existence.

In the case of Josh and Bryan, Bryan’s bank records show that he wrote a check for $3,000, and his side of the case is stronger.

Additional written sources can prove useful as well. Even if the contract was not signed and printed, other sources can include:

Emails
Invoices
Bank Statements or Credit Card Statements
Texts
Letters

Where Do Witnesses Fit In?

Witnesses can come in handy when attempting to decipher the details of a disputed verbal contract. Witnesses can either be the contract’s parties or third parties present when the parties created the agreement.

Witnesses can provide testimonies regarding what they remember about the deal, whether they were indirectly part of it or not. Sometimes, a witness did not know they were privy to the agreement, but an accurate and unbiased testimony can quickly change the case’s outcome.

For example, if Bryan’s friend Ryan remembers the particulars of the surfboard exchange, then Bryan’s case is strengthened. Unless, of course, Ryan remembers things differently than Bryan.

Figuring out the logistics of a verbal contract can be challenging, and proving the details can be difficult and time-consuming. However, an experienced contract attorney can help both parties sift through the details and come to an organized, rewarding conclusion that leaves little doubt as to the reality of the case.

When Should Individuals Contact an Attorney About Verbal Agreements?

While it is true that some verbal agreements hold up in court, we recommend always signing written agreements, especially when the consideration is valuable. For questions about oral contracts or if you have a problem with a verbal agreement, contact the skilled attorneys at Nakase Wade in California.

Our attorneys will be able to provide helpful advice concerning the nature of the contract, as we have handled many oral contract cases in the past.

The law firm of Nakase Wade understands the often challenging nature of verbal agreements and has helped many clients make sense of their oral contracts in the past. Contact Nakase Wade today for a free consultation.

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