A verbal contract is a legally binding, but unwritten, agreement that consists of all of the normal elements of a contract and does not violate the Statute of Frauds. 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 emotional ordeals. They generally follow a falling-out between the parties to the oral agreement.
Nevertheless, oral contracts are still used in Massachusetts. In some cases, this is out of a business necessity, like when two people reach an agreement without having a pen and paper handy. In other cases, the parties trust each other enough that they are satisfied with an unwritten, “handshake deal.”
The reality is that, while it is always advisable to get a contract in writing, oral or verbal contracts exist in Massachusetts. Whether you are being accused of breaking an oral contract, or whether you want to enforce a verbal agreement against someone who is trying to break it, the business and contract litigation lawyers at the Katz Law Group can help.
What are the Elements of an Oral Contract?
For a contract – including an oral contract – to be valid, it must have the 3 essential elements of an enforceable agreement:
- An offer,
- An acceptance of that offer, and
If any of these elements is missing from an oral agreement, there is no legally-binding agreement and, therefore, no enforceable contract.
Additionally, oral contracts have to comply with the Massachusetts Statute of Frauds. This statute forbids oral contracts in certain circumstances.
The first element is 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. Not all of the terms of the deal have to be included for the contract to be enforceable – just the ones that are material, or important, for the particular agreement. This generally includes terms like:
- The parties to the contract,
- The goods or services that will be provided,
- When they will be provided, and
- The price.
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 propose new or slightly different terms, it is considered a “counter-offer.”
Offers and counter-offers in oral contracts can happen rapidly, often in the span of only a few seconds. The specific words used, as well as the context surrounding those words, can make a big difference. This is why oral contracts can be difficult to enforce: The precise wording of the alleged offer will often be disputed by the party that is claiming that no contract existed.
The offer, or any counter-offer, must then be accepted for there to be a binding contract. Acceptance occurs when a party agrees to the terms of the offer. In a verbal contract, acceptance may be as simple as saying something like:
- “I accept,”
- “Let's do it,”
- “Sounds good, you got a deal,” or even
- “I don't like it, but okay.”
Just like with the offer, the specific wording of a purported acceptance can matter a lot. If there is a dispute, then each party will have their own rendition of what happened. Proving what actually happened is often difficult to do.
Many verbal agreements are often accepted with the shaking of hands in such a way that it indicates that a deal has been made. While a handshake is not a magical formula for the acceptance of an offer, it is a strong sign that the parties intend to be bound by the terms of the deal. However, even the handshake can be disputed by the party who is trying to show that no deal was made. Doing it in front of a witness can help enforce the deal.
Consideration is a legal term of art that means that both parties are giving something up in exchange for the contract. In most contracts, and especially in oral contracts, the consideration will be the exchange of 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, so long as they do not violate the Statute of Frauds. Like written contracts, oral ones 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 equally enforceable.
However, it is much more difficult to prove the terms of a verbal contract than a written one.
When the parties are disputing a written contract, the terms of the agreement are right there, in the document.
When there is no document to turn to in order to figure out the rights and obligations of the parties to the agreement, it adds a step to the process. First, the terms of the agreement, or whether there was even an agreement, at all, have to be settled. This often becomes a “he said, she said” dispute. Rather than simply turning to the document to determine what the contract entailed, each side will present competing versions of the agreement, and then try to show that they are the more credible party.
How Can I Enforce a Verbal Contract?
Enforcing a particular verbal or oral contract will depend on the circumstances of the case. However, many cases revolve around:
- The conduct of the parties after the alleged contract was created,
- Any prior conduct between the parties,
- How similar transactions are normally conducted,
- Testimony of the parties to the contract,
- Testimony by any witnesses to the alleged agreement, and
- Each party's credibility.
These kinds of evidence will help the court figure out the essential terms of the agreement, and whether the contract was breached.
How to Prove the Terms of a Verbal 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 reliable than any testimony that the parties can provide.
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 are usually the parties to the contract, though they may 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 and terms of the oral contract.
What is the 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.
The reason for the Statute of Frauds is to prevent people from fabricating an oral agreement concerning one of these very important types of transaction. This protects innocent parties from being thrown into a very serious dispute to protect their assets, where their credibility is a substantial factor in the outcome.
What About Oral Modifications to Written Contracts?
In many situations, there is a written agreement that the parties then verbally agree to change. 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 requires 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. This would leave the rights and obligations of the original, written contract secure.
In some cases, there has been an oral modification to a written agreement, but that original agreement falls within the purview of the Statute of Frauds. In these rare cases, Massachusetts uses the so-called Cummings Rule. This rule allows for the enforcement of oral modifications to written contracts that fall under the Statute of Frauds, so long as that verbal change is to the performance of the contract, rather than to a material term in it. If the oral change alters a material term of the written contract, it will not be enforceable in court.
What Happens if an Oral Agreement is “Unenforceable”?
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 are involved in a verbal contract dispute in Massachusetts, the business and contract litigation lawyers at the Katz Law Group can help. With their experience and legal advice, they can help you enforce the terms of your agreement, or can show that the alleged oral contract is not what was actually agreed to. Contact online us today or call our law office at (508) 480-8202. Our attorneys represent businesses in Worcester, Marlborough, Framingham, and beyond.