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Is a Verbal Contract Enforceable?

When most people think about contracts, they picture a long written document full of complicated legal phrases. For the most part, they would be right. Most contracts are in written form, as written contracts do a better job of outlining the terms of the contract. However, a verbal contract can also be enforced under the right conditions.

While a verbal contract is not necessarily the best choice, especially for business contracts, sometimes it is necessary. Having an experienced attorney who can enforce your contract, though, is even more important when it is not in writing. The business and contract litigation attorneys at the Katz Law Group have the years of experience needed to analyze and enforce your verbal contracts.

What is a Verbal Contract?

A verbal contract is a legally binding agreement that consists of all of the normal elements of a contract, but has not been put down in writing. The fact that it has not been put down in writing makes an oral contract tricky: If there is a dispute over what the contract included and what it entailed, there is no written document to look at to solve the disagreement. 

Instead, the terms of the deal often have to be figured out by the testimony of the parties bound by it, any witnesses to the agreement, and from the conduct of the parties after the deal was struck.

Unfortunately, because most verbal contracts are made by people who trust one another, the disagreements that tend to follow allegedly breached oral contracts tend to be more emotional ordeals because they often involve a falling-out. 

Elements of a Contract

For a contract - including an oral contract - to be valid, it must have the 3 essential elements of an enforceable agreement:

  1. An offer,
  2. An acceptance of that offer, and
  3. Consideration.

If any of these elements is missing, there is no legally-binding agreement and, therefore, no enforceable contract.

Offer

The first element is that of an "offer." An offer occurs when a party suggests terms of an agreement to another party. The terms of the offer must be sufficiently clear that a reasonable person could understand and be expected to follow them.

Sometimes, the person who is receiving an offer replies with an offer of their own. If they did not accept the terms of the original offer, but instead proposes new or slightly different terms, it is considered a "counter-offer."

Acceptance

The offer, or any counter-offer, must then be accepted. Acceptance occurs when a party agrees to be obligated to follow the terms of the offer. In a verbal contract, acceptance may be as simple as saying something like:

  • "Agreed"
  • "I accept"
  • "Sounds good, you got a deal"

Many verbal agreements are often accepted with the shaking of hands in such a way to indicate that a deal has been made. The handshake is not a magical formula for the acceptance of an offer, though it is a strong sign that the parties intend to be bound by the terms of the deal.

Consideration

Consideration is a legal term of art that means that both parties are giving something up in exchange for the contract. The most common consideration in contracts is money for goods or services. If only one side is giving anything up, then the agreement is likely to be a gift, rather than a contract. If it is a gift, then it is not a valid contract that endows both sides with rights and saddles them with obligations. 

Are Verbal Contracts Enforceable or Not?

Verbal agreements between two parties are just as enforceable as a written agreement. Like written contracts, they just need to meet the requirements of a valid contract to be enforced in court. If the agreement meets those requirements, both verbal and written agreements are enforceable.

However, the process of enforcing a verbal contract is different. Without a document to turn to in order to figure out the rights and obligations of the parties to the agreement, enforcing a verbal contract is often more difficult.

How to Enforce a Verbal Contract

While both verbal and written contracts are enforceable under Massachusetts law, verbal contracts are more difficult to enforce in many situations. To enforce a contract, the court must be able to know and understand the essential terms of the agreement.

Too often in verbal contract situations, the evidence turns into a "he said, she said" situation which makes it difficult to know what exactly was agreed upon between the parties to the verbal contract. Usually, the parties do not agree as to what the terms of the contract were, or disagree over how they were to be interpreted.

This does not mean that it is impossible to enforce an oral agreement. With the help of experienced legal counsel, you can prove the terms of the agreement and show that the contract was breached.

How to Prove the Terms of the Contract

Proving the terms of a verbal contract often requires a mixture of testimony from the parties to the contract and details of how they acted before and after the agreement was made.

While the parties' testimony does frequently devolve into "he said, she said" arguments, any inconsistencies in one side's rendition of events is often a sign that they are either not being credible or are unreliable. This can make it clear that the agreement was not actually the way they say it was.

The conduct of the parties before and after the disputed contract, though, is often more telling and more reliable. 

For example, if one party paid the other, that is strong evidence that there was an agreement of some sort. If a service was provided or goods were sent in close proximity to this payment, the essential terms of the oral contract start becoming clearer.

Other written documentation may be useful, as well. In many cases, while the original contract was not reduced to writing, later invoices, emails, letters, or even text messages may provide indirect proof of the oral agreement. For example, a text message asking nothing more than "when are the goods going to be delivered?" indicates that at least one party thinks that there was an agreement and that the delivery date has become an issue.

Sometimes, witnesses can be called to provide eyewitness testimony. Witnesses often include the parties to the contract, though they occasionally include third parties who were present at the time the agreement was made. Testimonial evidence can also be obtained from people who were indirectly or even unknowingly a part of the agreement, like the employees of one of the parties to the oral contract. These people can testify as to what they believed the agreement to be, based on how their job duties changed before, during, and after the oral agreement was made.

As you can see, a lot of work goes into determining the nature of an oral agreement. Proving the details of the contract often involves lots of indirect or even circumstantial evidence that comes from numerous different sources. Your Massachusetts contract lawyer can analyze the information in your case to determine the best way to prove the existence of the oral contract.

Oral Modifications of Written Contracts

In many situations, a written contract may originally exist, but the parties verbally agree to change one or more of its term or terms. If this is the case, the oral modification to the contract is treated like a verbal contract and is subject to the same limitations and enforcement difficulties as other verbal contracts.

To avoid this thorny situation, many written contracts contain a clause that demands that any modifications to it be in writing. This is very important to be aware of, as a verbal modification made in spite of this clause would likely be unenforceable.

Statute of Frauds

One issue that may come up with a verbal contract dispute is the Statute of Frauds. The Statute of Frauds is a law that requires certain types of contracts or agreements be in writing in order to be enforceable.

Under the Massachusetts Statute of Frauds, the following kinds of agreement must be in writing to be enforceable:

  • Agreements to pay from a person's estate,
  • Agreements to answer for the debt of another person,
  • Agreements upon consideration of marriage,
  • Agreements for the sale of land or any interest in land, and
  • Any agreement that is not to be performed within one year of the making of the agreement.

If the contract for any of the above is not in writing, then it is not enforceable. The same is true under the Uniform Commercial Code (UCC) for the sale of goods which exceed $500.00 in value.

Enforcing an "Unenforceable" Agreement

If your verbal agreement is unenforceable for some reason, especially if it violates the Statute of Frauds, this does not necessarily mean you have no remedy. While you will not be able to enforce the specific terms of your original agreement, you may be able to pursue what is called an "equitable" remedy in court.

An equitable remedy, such as promissory estoppel or unjust enrichment, is a claim which states that certain value was given to the other party and it would be unfair for that party to keep the benefit without paying for it. Your attorney would provide proof of the value of the benefit conferred to the other party, and you would fight for money damages to compensate you for your hard work or goods.

Consult a Contract Litigation Attorney in Massachusetts, Today

If you have a verbal contract that needs to be enforced in Massachusetts, the Katz Law Group can help you fight to make sure the terms of your agreement are followed, and that you receive the compensation to which you are entitled. Contact online us today or call our law office at (508) 480-8202. Our attorneys represent businesses in Worcester, Marlborough, Framingham, and beyond.

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