Are Verbal Contracts Binding in California?

A verbal contract can be legally binding in California, but proving its terms in court is often difficult. Written agreements provide stronger legal protection, reducing risks of disputes and misunderstandings.

By Brad Nakase, Attorney

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Table of Contents

1. What is a verbal contract?

2. What does a verbal agreement look like?

3. Are agreements made orally legally enforceable?

4. What situations do not allow verbal contracts?

5. When is it recommended, but not mandated by law, to have a written contract?

6. What situations call for verbal agreements?

7. Can a court find a verbal agreement enforceable?

8. If you’re not sure, write it down

What is a verbal contract?

Everyday life is filled with verbal contracts. We often make deals with others without writing anything down. But without a written contract, how can parties involved resolve a disagreement? Does a verbal agreement have the force of law?

You might be surprised by how complicated the answer is. This article will discuss the pros and cons of verbal contracts, including their limitations, and the dangers of not putting commitments in writing. First, let’s explain what a verbal contract is.

What does a verbal agreement look like?

A verbal contract is an agreement made through spoken words rather than written down. It happens when two or more people discuss and agree on terms without putting them in writing.

A verbal contract is an agreement between two or more people that does not require any kind of written record. Another name for a verbal contract is a:

Oral contract
Verbal agreement
Spoken agreement
Handshake agreement
Unwritten contract
Informal agreement

Are agreements made orally legally enforceable?

There are certain exceptions to the general rule that a verbal agreement cannot be legally enforceable. Although it is far more difficult to confirm and validate verbal agreements, there are situations where they can be just as legally binding as written ones.

For a verbal agreement to be enforceable in a court of law, it must contain the same terms as a written contract. Here are the necessary components, in case you forgot:

Offer and acceptance
Consideration
Intention
Legality
Capacity

But since it’s a little more complicated, we can’t just leave it at that. While verbal contracts can be valid, is it a good idea to stop using written contracts? Are verbal agreements only appropriate in certain contexts? We will go over a few significant exceptions in the section that follows.

What situations do not allow verbal contracts?

There are situations where a written contract is necessary by law and a verbal one is not acceptable. The statute of frauds is a legal concept with roots in common law that dates back to the 17th century. For a contract to be legally binding under this statute, both parties must put their names and the date on it and sign it. The purpose of the statute of frauds, which most states have updated to reflect contemporary morality, is to protect citizens from deceit and other forms of wrongdoing.

A written contract may be required in some states but not others due to differences in the statute of frauds. Written contracts may be required for the following, depending on your state’s regulations:

Various real estate contracts, including mortgage agreements, contracts for deeds, and real estate purchase agreements
Forms used in the purchase and sale of stocks, bonds, and other financial instruments
Sales contracts for products with a value exceeding a specific threshold, per jurisdiction (e.g., $500)
Arrangements in which the promise of marriage serves as consideration, such as a prenuptial or postnuptial agreement
Invalid contracts (such as copyright agreements) that are not executable within one year of their signing
Arrangements whereby one party promises to settle the debt of another

When is it recommended, but not mandated by law, to have a written contract?

Although written contracts are not always necessary, there are some situations in which verbal agreements are inadequate. The lack of a formal contract exposes the parties to needless risk. The difficulty in proving the exact wording of verbal agreements in court is a major problem.

Here are some situations where a written contract can save time and money by protecting both parties in the event of a dispute:

Employing workers
Providing services
Divorcing your partner
Renting a property
Terminating a contract
Borrowing or lending funds
Keeping information confidential

What situations call for verbal agreements?

Given familiarity with one another and a low potential for financial loss, verbal contracts may be suitable in certain contexts. A verbal agreement may be sufficient and suitable in the following cases:

Personal and small-scale deals: A written agreement may not be necessary, for example, when purchasing a used television from a friend for a reasonable price.
Arrangements that are not long-term or formal: A verbal contract is likely to be sufficient for informal arrangements or short-term agreements like babysitting or pet-sitting.
Strong bonds of trust: Certain relationships, like those between parents and their adult children, can benefit from verbal agreements because of the established trust between them.

Documentation is always a good idea, even in the aforementioned situations. Written contracts are usually the best option outside of these specific cases. Using written contracts can help you avoid expensive legal disputes and misunderstandings for more complicated or important transactions or arrangements.

Can a court find a verbal agreement enforceable?

A court can uphold a verbal contract if it finds enough evidence to establish the agreement’s existence and terms. What happens in court when one party breaks a verbal agreement and the other party sues is dependent on several things, such as:

The particulars of the oral understanding
The available proof that backs up the assertion
The rules that are relevant in the country where the disagreement happened

A verbal agreement can have the same legal weight as a written one, as mentioned earlier. Since there is no written record to back up an oral agreement, it is more difficult to prove its terms in court than in a written contract.

Imagine for a moment that the aggrieved party has proof that the other party broke a verbal agreement they had with them. If so, they might have a case for damages or other legal recourses and maybe win the lawsuit.

To back up a claim, you might use things like:

Witness testimonies
Written or verbal records referencing the agreement
Everything done by either side that is in line with the stated terms of the contract

If you’re not sure, write it down

Written contracts are more trustworthy and enforceable than verbal ones, though the latter are sometimes legally binding as well. Misunderstandings, arguments, and time-consuming and expensive legal disputes can result from relying only on verbal contracts. No matter how small the agreement may appear at the time, it is wise to have it documented in order to prevent any future legal complications. Spending the effort to draft a formal contract can end up saving you time, money, and stress.

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