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Jean   Murray

Are Verbal Contracts Legal?

By August 20, 2011

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A Business Story: Jim and Carter agree on a barter arrangement. Jim will maintain the landscaping around Carter's dental office and Carter will do Jim's dental work. They agree to an amount of work that each will do, roughly equal amounts on both sides. Jim makes an appointment with Carter and has his dental work done. He shows up one day to work on the landscaping, goes home after an hour, and never shows up again. Later Carter hears that Jim has declared bankruptcy. Can Carter sue Jim? Sure. But the bigger question is whether he can win a lawsuit against Jim. Carter may be able to recover his money from Jim, but maybe not, especially if there is a bankruptcy in process.


 

Legal vs. Enforceable. The simple answer to the question, "Are verbal contracts legal?" is: "Yes, but." It is not illegal to enter into a verbal business contract unless the nature of the contract itself is illegal (as in a contract for illegal drugs). But that's not the problem. Sure, it's legal, but is it enforceable? That is, can the verbal contract be upheld in a court of law? A verbal contract is difficult for a court to uphold because it turns into "he said/she said." There is no way for either side to prove their version of the contract.

Some contracts must be in writing. Under the Statute of Frauds, states require that some contracts be in writing in order for them to be enforceable. The most common list of contracts that must be in writing includes:

  • Contracts to answer to a creditor for the debt of another (as an executor for a will, for example)


  • Marriage contracts (prenuptuals, for example)
  • Contracts for the sale of real estate or relating to an interest in real property
  • Contracts not to be performed within one year.

In years past, it was common to have business agreements which were sealed with just a handshake. For better or worse, those times are past. It is probably best in every case to write up some kind of simple contract, even when you think "Well, this is silly." As I always say, "If it isn't in writing, it doesn't exist." Or, as Sam Goldwyn said, "A verbal contract isn't worth the paper it's printed on."

Comments
December 15, 2011 at 2:25 pm
(1) G.S. says:

My wife and I were shopping for a stereo one day. In the first store we entered we walked up to the stereos on display, within a couple of seconds a pushy salesman was on our backs. “What would you pay for this one” he opened up with, pointing to one stereo. Trying to get rid of him I made what I thought was a ridiculously small offer. “SOLD” he exclaimed.
When I told him that we literally had just started looking less then a minute before, and were not prepared to make an uninformed purchase he became quite agressive. He insisted that I had, by my statement, entered a legally binding verbal agreement to purchase the stereo at the quoted price. He then loudly demanded that we complete the sale, and when we tried to leave actually physically stood in our way. We pushed passed him and as we left he told us that if we came back we could not have it at the agreed upon price afterall (needless to say, we never returned). As I left we noticed that everyone in the store was staring open mouthed and speechless (the exchange had been quite loud and in the open).

My question is, was there ever any legally binding verbal agreement as he insisted (he never even told us one thing about the stereo, in fact I was not even sure which one he was referring to). I am pretty sure the answer is no.

January 26, 2012 at 10:31 pm
(2) reverbnation says:

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February 5, 2012 at 4:52 pm
(3) Jam says:

Hi,

I am now trying to terminate my 1 year rental contract. As I was abroad, we signed the contract and send to each other the scanned versions.

we have contacted via skype all the time before. When he sent me a rental contract for a year and termination period in 3 months in advance, I asked him to shorten in up to one months. At that time he said that we can always agree in midpoint and he shortened the termination period up to two months.

Now he is saying that the contract is for a year and we can not terminate it. I asked him to remember what he said in skype, but he is not remembering anything at all.

I only saved the messages that I sent to him, but he was talking to me instead of chatting in skype.

My question is is my case a verbal contract and have any value?

Thanks in advance, Jamshid.

February 6, 2012 at 6:15 am
(4) Jean Murray says:

What you have described is not a verbal contract; it’s a verbal change to a contract. A verbal change must be put in writing to be enforceable. As I always say, “it it isn’t in writing, it doesn’t exist.” In this case, even though the other person said, “we can always agree in midpoint,” unless you have that midpoint agreement in writing, the contract stands as written.

March 22, 2012 at 12:57 am
(5) Broderick Bazan says:

Thanks again for that blog.Really looking forward to read more. Will continue reading…

April 15, 2012 at 11:07 am
(6) M Howard says:

Five years ago my husband agreed to co-sign for a car with his friend and the friends wife. Over five years they have made late property tax payments which almost resulted in my husbands wages getting garnished, they have also made late payments on the car. Recently my husband learned that he is not a co/signer but is solely responsible. The friends wife never went back to sign the paperwork. My husband felt that it was a breach of their verbal contract because they mislead him and have no real legal obligation to make timely payments. The late payments have negatively impacted his credit so he took the car and sold it. The friend now wants to take my husband to court, does he have grounds to sue?

August 3, 2012 at 7:53 pm
(7) mindy says:

Last year a friend of mine was selling me her drumset her sister and I shared cell phone plan in my name. Her sister and I agreed that she would get a free cell payments in return she give the cell money to her sister for the drums. Here it is one year later and her sister never paid her and now she is harassing me. Her sister let me come get them when we met the amount. I was under the impression that they talked to each other with the arrangements. She wants to come get the drums now? Does she have the rights?

August 4, 2012 at 8:07 am
(8) biztaxlaw says:

This sounds like a case for “Judge Judy” or People’s Court and it involves 3 people, which confuses the issue. I’m really confused on who owes what to whom. I’d suggest the three of you sit down and work it out between you. Or your friend could take you to small claims court and let them sort it out; you can do that without an attorney. Here’s some information on small claims court.

September 18, 2012 at 10:05 am
(9) Varun Shah says:

i entered into a contract with my supplier on 1st of april 2008.The contract was to subsist till march 2009. We met at a common friends party on 1st feb 2009 where i asked him if he was interested in renewing the contract. He told me he was not sure because he might go to the Usa for a year if his visa got approved. I told him that if he stays back in india we shall renew the cntract. He agreed to that condition. His visa got rejected on 1st march 2009, but when he applied again it got approved on the 17th of march 2009. so he left for Usa on 20th march 2009. He told his servant that if i called i was to be informed that he would return soon.He came back on the 31st of march 2009. I entered into an agreement with another supplier on 1st april 2009. Also as per the original agreement the goods were to be supplied on the 5th of every month and i was suppose to pay on the 10th of the same month. After coming back from the usa he has filed a suit against me for the breach of contract. Can his suit be upheld in court? Is a mere exchange of words an agreement to sell? there are also doubts about the certainty of his visa approval or disapproval. Please suggest some arguments for the defendant.

September 28, 2012 at 6:46 pm
(10) Suezy says:

Hi my parents were buying a used camper from a relative. They decided they didnt want the camper and asked me and my husband if we wanted to buy it. So we said yes. The relatives that were selling it made my father put his name on the title along with my husbands. Now my husband and I cant afford to make the payments and dont want the camper is my father responsible for it?

October 2, 2012 at 12:46 pm
(11) Amber says:

My husband and I are suing our old landlord for unpaid rental deposit. Our contract ended Dec 31,2011. She called us and asked if we wanted to stay until Aug and we said sure send us a contract. She never sent one so we assumed we were on a month to month. We sent her a 30 day notice June 1,2012 and were out by july 1. We have tried to contact her and hve had no response until a week ago (it is now Oct 2,2012) where she said she is not giving us our deposit back and we owe her $567 for unpaid rent. Does her argument hold up in Utah court?

April 12, 2013 at 1:57 pm
(12) Jenny says:

My workplace has an attendance policy they claim is a “verbal guideline”. This so called guideline states that if I take xx amount of hours as planned, that I MUST use xx amount of hours to cover this time.

I’m a written in stone kind of person & in none of the HR policies that I’ve been able to find & read does it state that you MUST do this. The policies only insist that you need to enter time, but doesn’t specify how much time.

I’m now being told by my immediate supervisor that I’ll need to put in the time or face a “conduct issue” (a write up) which I deem unfair. This policy is not in writing & I’ve repeatedly told her that & I’ve been in contact w/HR.

Any help on this would be appreciated!

May 20, 2013 at 5:00 am
(13) Andy Jarvis says:

Two friends and i were going to start up a buisness I found and chose a company name to use designed all marketing materials and sourced suppliers. Two of us spent a year getting all the information produced to go on a website The 3 rd person said he would open the company in my name with all three of us as directors he only named himself on companies house as owner director and shareholderfive months later he still refused to put us in the company so we walked away from it all. He then claims we had a legal binding verbel contract there were no witnesses but he is threatening litigation does he have a case.

May 20, 2013 at 8:31 am
(14) biztaxlaw says:

If you engaged in business with him knowing that he set up the company in his own name, he might be able to claim that you agreed to the circumstances. Time to get an attorney.

June 26, 2013 at 3:37 am
(15) rene says:

i have a verbal contract to prove it i have him on recording will that stand up in a small claims court

July 10, 2013 at 4:17 pm
(16) Ericka DeHoyos says:

I enterered a verbal agreement that I would get pick of the litter when I bred my male dog with a friends roommates female. I didn’t want any money I just wanted a female for my daughter. We were there when she had her puppies and we asked the owner for pick of the litter. He agreed. My daughter told him she wanted a white female. He said agreed. He lied to my daughter and said there were two white females. 3 weeks later we found out there was only one white female. Then he told her he already promised someone else the white one. Then there was a blue male that would be her 2nd choice. He texted saying my daughter could have the white female and now he has changed it again saying she couldn’t have it. What can I do.

August 24, 2013 at 1:15 pm
(17) kim says:

What about cell phones companies who redo contracts over the phone

October 1, 2013 at 3:30 pm
(18) M says:

Thanks for this information. We’re torn about whether to pursue a situation and would appreciate any feedback.

We sold our car to a guy for cash. He came back with $200 less money than the originally agreed on price and we agreed {verbally} that he could return the racks instead of paying the last $200. The sales receipt of the car says the amount he actually gave us in cash. He said he’d get the racks professionally removed and bring them back.

Fast forward a month and he hasn’t done it or answered our calls. We filed a report with the police who called him. The guy called us right back and told us point blank that he likes the racks, isn’t going to remove them and can’t afford to pay us for them.

Is this something worth pursuing? Or are we bound to lose? Our concern is that he’s a total scumbag and if we lose we’re worried he’s going to go after us for damages of loss of his time.

Thank you!

April 19, 2014 at 11:33 pm
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