Laws on verbal agreements

Written by brian richards
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Laws on verbal agreements
Contracts do not have to be written, and can be valid with a handshake (Image by Flickr.com, courtesy of kamshots)

The expression "a verbal contract is not worth the paper it's printed on" is both true and false. Verbal contracts are, in many cases, legally enforceable and binding on the parties who make the agreement. However, proving the terms of a verbal contract can be difficult, and usually result in a "he said, she said" disagreement. Additionally, in certain cases, verbal agreements are prohibited from enforcement by law, even if you can prove the terms of the contract.

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Elements

A contract whether verbal or written has three elements: offer, acceptance and consideration. In contract law, lawyers and judges say that the parties must have a "meeting of the minds;" that is, both parties need to intend to enter into a contract. Thus, in order to have a valid contract, one party must make an offer, which the other party then accepts. Additionally, every contract must have "consideration" from each party, which means both people must give something up. An agreement to give someone £65 is not legally binding, but an agreement to give someone £65 in exchange for their piano is.

Statute of Frauds

Certain types of agreements must be written can never be verbal. These agreements are governed by what is called the Statute of Frauds. The law says that any agreements governing the sale or transfer of land, creditor or debtor relationships, services that cannot be performed within one year or the sale of goods regulated by the Uniform Commercial Code must be in writing. Even if you can prove the terms of a verbal agreement, contracts governed by the Statute of Frauds are not legally valid unless written and signed by the parties involved.

Oral Addendum

Parties will sometimes verbally modify an agreement that was previously in writing. Be careful when you do this. Many contracts include provisions that state that no addendum or modification will be permitted unless it is in writing or signed. Even if a contract does not include this text, if the other party denies the existence of an oral addendum, you will somehow have to prove that the verbal agreement exists. If you cannot, you will still be bound to the terms of the original written contract.

Evidence

The biggest hurdle to overcome with verbal agreements in proving what the terms of the agreement are. Parties can easily forget the specifics of the agreement, such as promised timelines, payment agreements and other specific, numerical terms. If there are no witnesses to the verbal agreement, and none of the provisions were recorded, parties will find themselves in court arguing "he said, she said."

Written Confirmation

If you make a verbal agreement and wish to avoid the problems with evidence, you can simply ask for written confirmation of the terms of your agreement. This can be done simply by writing an e-mail to the other person outlining the terms you verbally agreed on. When the other party writes back confirming your terms, you have essentially turned what was a verbal agreement into a written contract. This e-mail exchange can be used to prove the terms of your agreement in court.

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