Are Verbal Agreements Valid in a Court of Law?
It is important for both business owners and those who conduct business with others to know how to prove a verbal contract. Written contracts are usually more common in the business world, but verbal contracts may still be enforced in a court of law as a valid form of agreement. While verbal contracts are enforceable, they typically have a shorter deadline by which to be enforced. This is because verbal contracts rely on people’s memories, which can fade or alter over time. For instance, an individual only has two years to file a lawsuit over the violation of a verbal contract. By contrast, an individual has four years to file a lawsuit regarding a violation of a written contract.
There are some varieties of contract that legally must be in writing in order to be enforceable. These contracts include the following:
- Real estate contracts
- Contracts meant to pay someone’s debt
- Contracts related to marriage
- Contracts that may take more than one year to fulfill
How Can One Tell if a Verbal Contract is Enforceable?
A verbal contract or agreement is generally enforceable. However, four elements must be true:
- An offer has been made by a seller
- A party has accepted the offer
- There has been an exchange of something valuable
- Both parties intended to make the agreement and were not speaking hypothetically or joking
Though the majority of written and verbal contracts can be enforced under the law, there are some cases in which an agreement can never be enforced. Any kind of contract is unenforceable if one of the parties lacks the mental capacity to enter into a contract. There are other cases in which oral contracts are invalid, including the following situations:
- Selling goods above the state-mandated amount
- Transferring property
- Contracts that name an executor of a will
- Becoming she surety for another individual’s debt
Both oral and verbal contracts have the ability to be enforced in a court of law, but there can still be some difficulties. The court will attempt to analyze the key points of the case in order to enforce a contract. However, it can be difficult to establish the facts of a case when it boils down to a “he said, she said” narrative. Because the contract is currently a point of dispute, the parties are likely to disagree on the original terms. This makes it hard to weigh the evidence.
How Can Someone Prove a Verbal Contract?
When there is a disagreement related to a verbal contract, it is most likely that the issue comes from the misinterpreting of the original agreement. Essentially, each party believed the agreement to mean something different. For the person filing the suit, he or she would be best served by providing some kind of written communication to prove their side of the story. Some types of valid and helpful communication include the following:
- Text messages
- Notes made at the time of the agreement
- Proof of payment, such as canceled checks or transaction statements
A party may also provide witnesses who were present when the agreement was made. These witnesses may testify to the existence of the agreement, as well as its terms. In addition to offering written evidence and witnesses, an individual may also prove a verbal contract by the actions of the involved parties.
When an individual enters into a verbal contract, he or she should take the following steps to avoid future issues with enforcement:
- Getting receipts and quotes
- Writing an outline of the established terms
- Have a witness to the verbal contract or deal
Believe it or not, but handshake deals still form an official contract or agreement. From Bill Gates to Bill Clinton, many powerful individuals still use them to great effect. That said, while many deals may begin as handshake agreements, they are typically followed by written documentation.
What Are Problems Associated with Verbal Contracts?
When it comes to the enforcement of verbal contracts, the statute of limitations is a big issue. The statute of limitations is a time limit that determines when a lawsuit may be filed against another party. One should know that verbal agreements have a shorter statute of limitations. This is because the enforcement of verbal contracts relies heavily on human memory as evidence. After a few years, it is unlikely that someone would clearly recall the details of a conversation. For this reason, it is best to have something in writing to bolster one’s case. It will help eliminate any fraudulent contracts.
One should remember to have a witness whenever making a handshake deal, so that a third party has heard the terms of the contract. If there is no witness to this manner of deal, then one should be sure to act on the contract as soon as they are able.
If an individual acts on a verbal contract immediately, then he or she is offering more evidence that the contract exists and one has been compliant on their end. Other ways to support a contract include maintaining a written correspondence. Even writing a basic ‘thank you’ letter regarding the deal can be helpful.