How Can Verbal Contracts Be Enforced?

To enforce a verbal contract, the following elements must be proven: 1. An offer was made, 2. The offer was accepted 3. Consideration was exchanged 4. All parties had a meeting of the mind, and 5. The aggrieved party sustained damages.

Oral contracts vary by case. While some verbal contracts are enforceable, others are difficult to prove based on a lack of information or proof.

What Defines a Verbal Contract?

An Example

Every September, George and his wife Ellen organize a yard sale in their neighborhood. This year, the couple’s neighbor Elaine becomes interested in a beautiful antique bureau that George and Ellen are selling. George handles the sales, so he tells Elaine that the bureau is hand-carved and has been in the family for generations. However, with three kids and one on the way, they do not have room for the gorgeous piece of furniture that has been in Ellen’s family for generations.

There is no price tag on the bureau, so Elaine makes George an offer: could she buy the bureau for $1200?

George thinks the price Elaine suggested is low, and he looks around for his wife Ellen to confirm. However, Ellen took the kids to soccer practice. George is on the spot and makes a counteroffer to Elaine: $1500 for the antique piece of furniture.

Elaine smiles and accepts George’s offer. She writes him a personal check for the $1500, and George tells her he will deliver the bureau the next day with his pick-up truck since it is too heavy for her to take now. Elaine writes down her address, takes down George’s number, and drives away, happy that she is the new owner of an antique, hand-carved bureau.

George and Elaine have just created what appears to be a successful oral contract, and we will check back in with them a bit later.

Verbal Contracts vs. Written Contracts

Verbal agreements, also known as oral contracts, are more common than many think. Oral contracts are agreements that individuals or businesses do not record in written form. In other words, there are no signed documents to mark that the parties made the deal.

While some oral agreements are enforceable in a court of law, others are not. Usually, this distinction depends on the presence of proof in the form of evidence or witnesses. While most attorneys recommend that formal agreements be documented in writing, verbal contracts are widely used in various situations. Therefore, it is important to understand how they work and how people can validate these agreements.

What are the Components of a Contract?

Whether contracts are written down, expressed verbally, or implied, they all possess the same characteristics. However, some of these components come in different forms depending on the contract’s format. A contract’s crucial elements are offer, acceptance, and consideration.

What is the Offer in an Oral Contract?

First, one party must extend an offer to another. When one party suggests the terms of the agreement to the other, the terms must be clear. Both individuals should be able to understand and follow the logic of the agreement.

When Elaine offers to buy the bureau from George for $1200, she makes a clear offer to exchange cash for the furniture. George then makes a clear counteroffer which Elaine accepts.

The offer does not need to include every term involved in the contract, but it does have to include the crucial terms of the agreement. These normally include:

The parties involved in the contract
The services or goods being provided
When the goods or services will be provided
The price

The verbal contract between George and Elaine represents these components. Therefore, Elaine and George are the two direct parties involved, and the antique bureau represents the goods provided. George said he would deliver the bureau the next day, and the price agreed on was $1500.

Our example features a counteroffer, so George is the party that formally accepts Elaine’s offer. Counteroffers can rapidly occur when deals are made, and the specific language used can significantly impact the parties involved.

This difference is another reason why verbal contracts can prove hard to enforce: one party disputes the wording of the offer or claims that the offer never existed in the first place. Acceptance is also a key aspect of a contract.

What Defines Acceptance in an Oral Contract?

The parties must accept the offer to create a contract that is binding. This acceptance occurs when one party agrees to the other party’s offer and the terms included in that offer. Acceptance can also occur as a counteroffer, as it does in our example of George and Elaine.

When one party accepts the offer in a verbal contract, the actual words uttered are important. Acceptance usually occurs alongside standard words and phrases such as “that sounds good,” “you’ve got a deal,” or even simply, as Elaine says: “I accept.” However, if there is a dispute, the parties will analyze these words. They also might be examined by attorneys as well as the court.

In the case of a disputed verbal contract, often, the parties have their unique version of what happened. This type of debate often makes it difficult to figure out exactly what occurred when the deal was made.

George promises Elaine he will deliver the bureau the next day. However, a conflict quickly emerges when George’s wife, Ellen, returns home. Ellen, the bureau owner, is upset that George sold it for such a small amount. Ellen tells George that the bureau was at least worth $3500 and that they cannot sell it to Elaine for $1500.

When George explains that he has already accepted payment through a personal check, Ellen tells him to rip up the check. Instead, George calls Elaine and leaves a message, telling her that, unfortunately, he cannot deliver the bureau to her tomorrow.

When a verbal contract is disputed, can it be enforced? This question depends on the nature of the oral agreement and the elements of proof involved. If a verbal contract can be effectively proven, the court can enforce it. Consideration is another contract element that signals a deal has been made.

What Defines Consideration in a Verbal Contract?

Consideration implies that both parties are “giving something up” in exchange for the contract’s terms. Usually, consideration represents the exchange of money for services or goods. In our example, the consideration for George and Ellen is the now-disputed bureau. For Elaine, it is the check for $1500. Both parties give up the item or the amount of money in exchange for something else.

If only one party gives something up, then the arrangement is based on a gift instead of a contract. The arrangement does not create a valid contract when one party gives another a gift. Contracts endow both parties with rights and ask both sides to meet obligations.

Consideration often is attributed to a “meeting of the minds,” which means that both parties discussed the contract, agreed, and were aware of the terms of the deal.

When parties dispute a contract, one party may contact a breach of contract California lawyer to help recover money damages. For the court to enforce the contract, there must be no valid defense to enforcement. This distinction means neither party can be a minor or lack mental capacity. Additionally, the court may deem the contract unenforceable if the contract resulted from fraud or duress.

Are Verbal Contracts Enforceable?

Oral contracts can be hard to prove. The court has to identify the key terms of the contract, and the parties might not agree on what was said or what occurred. When documents or signed contracts support an agreement, proving the contract valid is much easier.

When one or both parties dispute a verbal contract, it can be helpful to contact a contract attorney. One of the first things an attorney will do is to ask if there are any documents, signed or unsigned, that back up the verbal contract.

For example, now that the verbal contract between Elaine and George is in dispute, Elaine may decide to pursue what she sees as her rightful purchase of the bureau. If Elaine contacts an attorney, the attorney will attempt to gather proof of the oral agreement. Elaine wrote a check for $1500 and made it out to George so that a personal check could be valid proof of the deal. Also, George left her a voicemail about the deal, which Elaine’s lawyer could also reference in the case. However, since George had not yet delivered the bureau to Elaine, the exchange of goods was not yet complete, so this could be difficult to prove. If George’s wife Ellen asks George to deny the deal was made or even lie about the terms or what he remembers, the disputed agreement will grow even more complex.

As is evident, disputed verbal contracts often devolve into “he said, she said” disagreements. When the agreement’s validity comes down to one person’s word against another’s, proving the terms of the deal can be difficult. For example, if George says that he does not remember accepting or finalizing Elaine’s offer, and Elaine says he did, this is now a “he said,” she said” debate.

In this case, the judge will examine both parties’ rendition of what occurred and try to find errors or inconsistencies. When this occurs, the contradictions in one or both parties’ telling of the events become very important. For example, if George tells the court that he agreed to the deal and later says he did not, this is an inconsistent account. Likewise, if Elaine remembers making the deal inside the house but later says that she and George were outside on the front lawn, this is also a noted inconsistency.

How Can Oral Contracts be Proved?

Proving an oral agreement can be challenging, yet multiple elements can help show that a contract exists. Proof of payment is one of the most significant aspects, so the check that Elaine wrote to George would become an integral piece of evidence if she chose to pursue the case.

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—the consideration in the deal—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 believability.

Written Sources

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

Emails
Invoices
Letters
Text Messages
Bank Statements, Checks, and receipts

Witnesses

Witnesses can also prove helpful when attempting to piece together 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.

Elaine remembers several people present at the yard sale, including her friend Phillip. Elaine calls Philip, and he offers to testify in a court of law if needed. Now, Elaine has one component of solid proof—the personal check—and a witness to the oral contract.

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

What is the Statute of Fraud for a Verbal Contract?

The Statute of Frauds requires that some contracts be placed in writing to be enforceable. These statutes differ from state to state, so it is best to check in with the state where the disputed agreement occurs.

In California, the Statute of Frauds includes agreements for:

The sale of personal property for more than $5,000
Real estate sales
A property mortgage
A sale of goods over $500
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
Lending over $100,000 or providing the same amount of credit, not used for household, family, or individual expenses
Answering the debt or default of another person
A real estate sale or lease for longer than a year involving an agent or broker as a third party

The Uniform Commercial Code (UCC) governs contracts involving goods’ sales. The UCC requires that parties write down contracts for selling goods over $500.

What is the Statute of Limitations for a Verbal Contract?

Another problem that arises concerning oral agreements is called the Statute of Limitations. The Statute of Limitations describes the time period during which one party must file suit against another party if there is a dispute. Oral agreements have a briefer Statute of Limitations because of the necessity of new evidence and testimony of witnesses.

When Should Individuals or Businesses Seek Legal Assistance with Verbal Contracts?

Figuring out the logistics of a verbal contract can be challenging, and proving the details can be difficult and time-consuming. Therefore, if one or both parties dispute an oral contract, it is always best to contact an experienced attorney for help with the matter. A lawyer can help both parties identify and organize the key elements of the case and bring about a welcome settlement.

While Ellen was angry with George about selling the bureau, she relented. George told Ellen that Elaine had already paid him and that he had already promised to deliver the bureau. Elaine, who had contacted an attorney for a consultation, could keep the piece of furniture. Ellen decided never to leave George in charge of the annual yard sale again.

Unfortunately, not all contract disputes can be settled in such an easy manner. Therefore, parties should always strive to document the agreement in writing and make the terms as clear as possible.

While written arguments are a much better option, assorted parties create verbal agreements daily, and disputes continue to occur. If you need help with a verbal contract dispute, contact the California business lawyers at Nakase Wade. Our experienced team will help you figure out how to solve the dispute in the best manner possible.

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