Is a verbal contract legally binding? How do you prove a verbal contract?

A verbal contract is legally binding and enforceable with several exceptions. A plaintiff can prove a verbal contract with witnesses and documents showing that the plaintiff took action related to the agreement, such as making payment or doing something that benefited the other party.

Brad Nakase, Attorney

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Verbal Contract Example

Jesse owns a garage where he repairs cars. One day, while driving around town, he passes by a man whose car is broken down on the side of the road. He stops to offer help, popping the car’s hood to assess the problem. He quickly diagnoses the issue and suggests that the man, Todd, have his car towed to Jesse’s shop for repairs. Todd agrees, and the two men shakes hands. Later, after Jesse has successfully fixed Todd’s car, he asks for payment. Todd is confused at the $3000 bill. He explains to Jesse that he thought the repair was complimentary. Jesse insists that they had a verbal contract, with him offering to fix the car and Todd shaking his hand. The two continue to disagree, and Jesse considers taking the issue to court. However, he wonders whether verbal contracts can be enforced. Without written evidence of the deal existing, how can Jesse prove that he is owed money for fixing the car?

Is a Verbal Agreement Legally Binding?

It is a frustrating reality that sometimes individuals renege on a verbal agreement by not performing their duty or fulfilling their obligation. When this situation arises, the injured party can take a number of avenues. Potential responses range from taking the situation as a lesson learned to taking legal action against the transgressor. The appropriate response will depend on the subject of the contract, its overall importance, as well as the validity of the agreement.

While a verbal agreement is generally not a preferred form of contract, is can indeed be valid and legally binding in a court of law. Therefore, if an injured party wants to take the issue of the breached verbal contract to court, he or she is free to do so. However, one must first assess their options and whether legal action is the wisest step to take.

What Are the Elements of a Verbal Contract?

Every contract, whether it is verbal, written, expressed, or implied, must contain specific elements for it to be considered legally valid. For instance, there needs to be an offer and acceptance of that offer. This means that one party suggests an arrangement, such as buying a lawnmower for $400, and the other party must accept the terms of the offer.

Example: Francis is a roof tiler. While passing through his neighborhood, he sees that one of his neighbors has a roof in need of repair. He knocks on the door and casually offers to fix the tiles. This qualifies as an offer of a service. The neighbor, Fred, thinks about it before agreeing to the deal.

Another element of a contract is known as consideration. This means that both parties give something up in exchange for the contract. The item or service must be something of actual value for the consideration to be legitimate. There must also be mutual assent, otherwise known as a meeting of the minds. The parties of the agreement must be aware that a contract has been created, as well as the specific terms of the contract.

Example: Francis makes sure to clearly explain to Fred that the retiling service will cost $1000. In this case, the contract involves legitimate consideration. Francis is offering a real service – retiling – to Fred, who will pay the roofer one thousand dollars for his service. Both men acknowledge the terms of the contract, including what they will exchange. They also shake hands to demonstrate that both acknowledge the existence of a contract.

For a court to legally enforce the contract, both parties must have the mental and legal capacity to form a contract. For example, if one of the parties was mentally incapacitated at the time of the contract’s formation, then the contract may not be enforced. Similarly, if one of the parties was a minor, then the contract is also invalid. If one party claims that the contract was the result of fraud or duress, then he or she may be able to stop the contract from being enforced.

Example: Let’s say that Fred has dementia. In this instance, he is not mentally capable of forming a legitimate contract. If he were to not pay Francis for the retiling service, a court would not enforce the contract due to mental incapacity. Francis would be out of luck. Similarly, let’s say that Fred was not home, and instead his sixteen-year-old son agreed to have the retiling done. If Fred later did not pay the $1000 bill, Francis would still be out of luck. A court would not enforce a contract formed by a minor.

How Is a Verbal Contract Enforced?

One of the problems associated with verbal agreements is the difficulty involved with enforcing them. A court must be able to understand the major terms of a contract in order to make it enforceable. Proving a verbal contract can be very challenging if the case turns into a “he said, she said” account. In court, the parties might not agree about the terms of the contract or even if a contract existed in the first place. It is much easier to enforce a contract if the terms of the agreement were written down and there is documentary evidence. For this reason, the party wishing for the enforcement of a contract has the burden of proof and must demonstrate to the court that the contract existed, as well as what its terms were.

Example: Vanessa is a costume designer. One day, she is approached by Chrissy, who works for a local high school’s drama department. The drama club is putting on a performance of War and Peace, she Chrissy asks Vanessa if she would design the costumes for the students. Vanessa is happy to do so, and she assumes she will be paid for her work. After all, Chrissy says, “Rest assured, you will be rewarded for your hard work.” However, after the play runs and Vanessa asks for payment, she is denied her money. Chrissy explains that she assumed it was a favor to the school – a gift. Vanessa says that she expected to be paid for her labor. When the two go to court over the breached contract, the issue goes nowhere due to each woman presenting her own opinion of the interaction. Vanessa insists there was a contract, while Chrissy insists there is no evidence of an agreement. Unfortunately, there is no documentary evidence to help Vanessa’s case.

How Is a Verbal Contract Proven in Court?

It can be very challenging to prove the existence of a verbal contract, which is an essential step in making it legally enforceable. That said, there are several methods by which an individual can prove the existence of a contract. For example, an individual may offer evidence of himself or herself performing service or delivering the product called for by the terms of the contract. Proof of payments can also show that some kind of deal existed between the two parties.

If anyone was present at the creation of the contract, then he or she may be called to stand as a witness. Also, written communications between parties that reference the agreement can be useful in proving the existence of a contract. These communications may include texts, emails, and receipts.

Example: Jack is an office manager who is put in charge of ordering furniture for the workplace. He contacts Harold, who owns a furniture company. Jack explains that he would like to order 25 ergonomic chairs for his employees. Harold agrees to provide the chairs in exchange for $2000. However, he would like the money upfront. Though Jack is wary of making a deal over the phone, he agrees, giving Harold the company credit card number. Two weeks later, the chairs have still not arrived. Jack takes Harold to court over breach of contract. However, he has a difficult time proving the contract existed since there is no receipt. Then Jack remembers that he sent Harold a text a few days after payment, asking when the chairs would arrive. This text proves the existence of a contract, and Jack wins the case.

What Is the Statute of Frauds?

In certain circumstances, an oral contract may be unenforceable in a court of law. This occurs when the specific case falls under the Statute of Frauds. This law indicates several kinds of contracts that must be written down in order to be valid and enforceable. These contracts include the following:

  • Marriage
  • Transferring ownership of land or real estate
  • Contracts that cannot be performed within a year
  • Ensuring the debt of another party
  • Taking the role of executor of a will
  • The sale of goods greater than a certain value; the Uniform Commercial Code (UCC) rules over contracts involving the sale of goods

Example: Ursula is eager to buy her first house, and while driving around in Los Angeles, she finds the perfect place. When she asks the seller for the price, the seller asks for $300,000 in cash and for the agreement to be done verbally, without paperwork. Though suspicious, Ursula agrees to this. Upon moving into the house, she discovers black mold and a cockroach infestation. It also turns out the foundation is about to collapse. When Ursula hires a lawyer to sue the seller, her lawyer informs her that the contract is invalid and unenforceable. Because the deal involved real estate, under the Statute of Frauds, the contract is illegitimate.

What Is the Statute of Limitations for Contracts?

The statute of limitations is the time limit within which a party can file a lawsuit against another party to get damages in the event of a breached contract. With verbal contracts, there is generally a shorter statute of limitations timeframe as compared to that for written contracts. This is because of the need for fresher evidence. After a certain period of time, parties and witnesses may not remember details as clearly, which can become a serious problem when there is no written evidence to consult.

Can a Lawyer Help Prove a Verbal Contract?

It is always best to try to put agreement in writing to avoid many of the issues that may arise with verbal contracts. However, life happens, and sometimes it is impossible to avoid making a verbal agreement. In the event of a lawsuit over breach of contract, a lawyer can help the plaintiff gather evidence of a contract as well as represent them in court.

If an individual must constantly draw up contracts as part of their business, then it may be wise to retain a lawyer to draft or review contracts. An experienced contract attorney may ensure that the proper terms are included in contracts to protect their client’s legal rights and interests. A lawyer may also be able to explain their client’s obligations under contracts.

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