How Do You Make a Verbal Agreement Legally Binding?

Find out when a verbal agreement is legally binding in California, including required contract elements and statutory exceptions. Review practical steps to strengthen enforceability and reduce risk when relying on oral agreements.

By Douglas Wade, Attorney

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Table of Contents

1. Introduction

2. Why do companies sign verbal contracts?

3. Do verbal agreements have legal force behind them?

4. Verbal Agreement Validity

5. Principles and Exceptions of Oral Contract Law

6. When are contracts in writing advised (though not legally required)?

7. Verbal agreement’s legal enforceability

Introduction

Oral or verbal agreements can be entirely enforceable in California under a number of conditions, which many residents are surprised to learn. Some contracts have to be in writing; the California Civil Code expressly forbids oral agreements. Yet, a verbal agreement can be upheld in this state with the exceptions listed in this article.

Why do companies sign verbal contracts?

The heightened risk associated with verbal agreements makes one wonder why anyone would ever sign one in the first place.

Although written contracts are more reliable and secure, verbal agreements do have some potential benefits.

Speed: The drafting, completion, and signing of written contracts require time. It just takes a few minutes or even seconds to make a verbal agreement, though. Commitment on the spot is conceivable with this method. Therefore, verbal agreements could seem good over the phone or in negotiations that are gaining speed.
Convenience: Some companies or customers dislike red tape in any form, including contracts. They like verbal agreements because they are convenient and simply need a brief exchange of words.
Informality: A formal contract may be too formal for certain situations. For example, a business owner and client who have an established relationship for several years may feel awkward introducing a formal contract into their existing relationship.
Misunderstanding: Many people enter into oral agreements without even knowing they are real contracts. Such vaguely understood verbal contracts may still be binding contracts if the essential elements of a contract are satisfied, even if one party has not agreed or consented to it.
Trust: Verbal agreements are generally based on a joint trust between the parties. Since they may have collaborated for years, people or companies entering into these partnerships might not see the need for formal contracts.

A person’s legal ability and consent are more clearly demonstrated when they sign a contract. However, because there is no proof that both parties are expected to be legally obligated, these important elements could prove challenging to establish in verbal agreements.

The issue of whether an oral contract has legal force cannot be easily answered. Verbal agreements are frequently enforceable. This often requires more work and may call for supporting documentation.

Do verbal agreements have legal force behind them?

There are a few exceptions to the rule that verbal agreements are legally binding. Certain verbal agreements can have the same legal force as written ones. They are much more difficult to confirm and establish, though.

Verbal contracts must have all the elements of a valid contract to be enforceable and binding. This is just like their written counterparts.

Offer and approval
Intention of Consideration
Capacity for Legality

The answer is a bit more. Let’s get into more details & some significant exceptions.

Verbal Agreement Validity

Any oral contract has the drawback that any conditions must be established orally rather than in a written agreement, and people frequently have conflicting or false memories of what was agreed upon. It is a well-known fact that proving the terms of a verbal agreement is twice as time-consuming and three times more expensive than for a written contract. There is never a better option than a written contract over an oral one.

It is simply more difficult to prove, but it does not imply that oral contracts aren’t enforceable in a number of circumstances.

Oral agreements are sometimes expressly forbidden, and the legal system will not uphold them if they are not in writing. The following is a discussion of them.

The question of whether an oral contract can be enforced is not the same as the PAROL EVIDENCE RULE. It defines the conditions under which in-person testimony may be used to prove or disprove the contents of a writing.

And you need to keep in mind the difference between an “express contract,” which is a contract that you have executed either orally or in writing, and “implied contracts,” which are the contracts inferred from the conduct of the parties. Under Civil Code Section 1619:

A contract might be inferred or explicit.
A contract with explicit terms is one whose terms are expressed verbally.
A contract that is implied is one whose existence and conditions are demonstrated by conduct.

“Conduct” can be defined as any act or neglect that demonstrates to a jury or judge that a consensus has been formed. For instance, let’s say you give me the paint, equipment, and entry to your house, and then tell your spouse that you plan to pay me a reasonable amount. An oral agreement would be one in which I orally agreed to give you the going rate after you informed me of this.

Principles and Exceptions of Oral Contract Law

Ordinarily, oral contracts are permitted under California law. Civil Code Section 1622 states:

All contracts, with the exception of those specifically mandated by law to be in written form, may be made orally.

Additionally, even while verbal agreements usually have to be in writing, they may still be enforceable if one party deceives the other into not signing a written contract.

If a party prevents a legally required written contract from being drafted into writing by deceiving another party, any individual who is misled into thinking the agreement is in writing and moves against that belief can put it against the deceitful party.

Additionally, CC 1624 contains a specific list of contracts that need to be in writing.

The following agreements are void unless they are in writing and signed by the party that will be charged or the agent of the party, or by a memorandum or note of that kind:

A contract that, according to its provisions, cannot be carried out within a year of its creation.
A special pledge to provide an explanation for another person’s debt, miscarriage, or default, unless Section 2794 specifically addresses such circumstances.
An agreement made by the party to be charged’s agent for the sale of real estate or an interest in it, or for leasing for a duration longer than a year, is void unless the party to be charged endorses the agent’s written authority.
A contract that makes it possible for a broker, agent, or other individual to sell or buy real estate, rent real estate for a duration longer than a year, or find, introduce, or procure a buyer or seller of real estate, or a lessee or lessor of real estate, for payment or a commission.
A contract whose conditions prohibit performance during the promisor’s lifetime.
A real estate buyer’s commitment to pay off a debt covered by a deed of trust or mortgage upon the purchase of the property, unless the conveyance of the asset expressly states that the buyer would assume the debt.
A contract, undertaking, commitment, or promise made by an individual involved in the business of extending credit or organizing for the providing of money or providing credit in a sum in excess of $100,000, not primarily for uses within the home, family, or personal sphere.

This provision defines a contract, pledge, commitment, or undertaking to lend money that is secured only by residential property, which includes a maximum of four dwelling units, as being for household, family, or personal use.

There are numerous exceptions to the aforementioned fundamental legislation, frequently granted by specific interests or particular market demands. Currency options, for example, and the oral sale of goods & precious metals are all permitted.

These citations only represent a small portion of the extensive body of legislation and statutes pertaining to California’s enforcement of verbal agreements. It should be sufficient to say that anyone who believes there might be a legally binding verbal agreement should see an experienced attorney to find out if that is the case. They should also not assume that only written agreements can bind both sides, particularly in situations when written agreements are typically required.

Because they detest fraud, courts are more likely to uphold contracts when they believe one of the participants “fooled” the other into depending on a promise. Things like a promissory note and waiver can be used to establish a legally binding agreement if the requirements are not followed.

When are contracts in writing advised (though not legally required)?

Although written agreements are not legally needed, oral contracts are insufficient in several situations.

For the parties, the absence of a written contract adds needless risk. The difficulty of proving the exact contents of verbal agreements in courts is one of the primary problems.

A written contract can save both money and time in the future. It gives both parties legal protection in the event of a disagreement in each of the situations described below:

Employing workers
Offering services
Getting separated from a partner
Getting a rental
Terminating a contract
Borrowing or lending money
Maintaining the confidentiality of information

Verbal agreement’s legal enforceability

We advise people to engage in a legal arrangement in writing wherever possible. A formal contract that has been signed helps shield people against future disagreements and violations. There are those who have no means to commit their agreements to paper. There are steps people can take to help ensure their verbal commitments are enforceable, valid, & durable.

Use Key Terms: All agreements should be made by the parties using straightforward language. Instead of trying to deal with rumors and speculation, it is the court’s need to know the terms of the bargain. So be sure the terms are clear, and everyone knows about all the provisions.
Conditions have to be first met: The court will not enforce a contract if one of the parties is mentally ill, a minor, or was unduly or unlawfully influenced.
Assent from both parties: Verbal contracts are often described as “meetings of the minds,” meaning both parties agree on the terms.
Fair Consideration: Both parties have to exchange anything of value for a transaction to be successful.
Offer & Acceptance: A proposal must be made by one party. The parameters of the agreement must be accepted by the other party. The parties must have made both an offer and an acceptance.
Keep a record of the agreement: Verbal agreements need some kind of evidence. This documented evidence, which may be provided by invoices, paychecks, services rendered, or other records, should be maintained on file by both parties.
Convert to a written agreement: In California, people should convert verbal agreements into written contracts wherever feasible. In a court of law, this act will greatly facilitate the enforcement of the contract. People should, however, maintain a log of all written correspondence with the other party if this is not feasible.

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How Do You Make a Verbal Agreement Legally Binding?

Introduction

Why do companies sign verbal contracts?

Do verbal agreements have legal force behind them?

Verbal Agreement Validity

Principles and Exceptions of Oral Contract Law

When are contracts in writing advised (though not legally required)?

Verbal agreement’s legal enforceability

How Do You Make a Verbal Agreement Legally Binding?

Is a Verbal Contract Legally Binding?

APPROVED AS TO FORM – Why Attorneys Should Avoid Signing Settlement Agreements

Understanding the Superiority of Live In-Person Deposition vs Video Deposition

General Damages and Special Damages in Personal Injury Lawsuit

Subpoena to Appear At Hearing or Trial vs Notice to Appear At Trial

Trustee Responsibilities

Trustee And Beneficiary Conflict of Interest

What is The Burden of Proof in Civil Case?

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Why are most civil cases settled before they go to trial?

Statute of Frauds California

Motion for Remand

Motion to Quash Subpoena

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