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 Options Does an Injured Party Have in the Case of a Breached Verbal Contract?
When a verbal agreement has been broken, the injured party should ask themselves three vital questions before deciding whether to walk away, seek mediation, or file a lawsuit. It is best to discuss the options with the advice of an attorney experienced in contract law. The questions an injured party should ask themselves include the following:
- Is there a valid legal case?
- Would mediation be more effective than a lawsuit?
- Would the plaintiff be able to collect on a judgment if they win?
When it comes to verbal agreements, it is difficult to decide whether there is a valid legal case. In general, mediation is a more cost-effective strategy than a lawsuit. It may also be the best option if one wants to preserve the relationship between parties. If the injured party wishes to collect a money judgment, then they should be prepared for further legal actions.
Is the Subject of the Verbal Agreement Important?
The subject of the verbal agreement is indeed important. The injured party must determine whether the contract falls under statutes of fraud and Uniform Commercial Code protections. These laws require that certain types of contracts be in writing for them to enforceable in a court of law. These contract types include the following:
- Real estate contracts
- Marriage contracts
- Contracts that involve a co-signer
- Purchase agreements for goods worth $500 or greater
- Agreements with terms that cannot be completed in under one year
How Does an Injured Party Establish Evidence of a Breached Verbal Agreement?
A common problem that comes up when enforcing a verbal contract in court is the lack of evidence. That said, partial or significant performance of the contract’s terms can serve as the required evidence. This is the case even for agreements that are not in writing.
Let us consider an example. A man named Jason has an oral agreement to build a treehouse on his neighbor’s property in exchange for the cost of materials and tools, in addition to a $300 fee. Jason is halfway into construction of the treehouse when the neighbor reneges on the contract. A court of law might decide that the neighbor must return Jason to his pre-contract condition. This means that the neighbor may have to reimburse Jason. It is also possible that the court will order that the remainder of the contract be completed according to the original terms.
What Are Implied Contracts?
If an individual trusts the promise made in a verbal agreement to their detriment, or harm, then a court of law might consider the agreement to be legally binding. A common example of this situation involved statements made by an employer to an at-will employee. These statements may create an implied but legally valid contract between parties. This exact scenario played out in Toussaint v. Blue Cross & Blue Shield of Michigan (2009), when a court ruled that verbal statements concerning job security qualified as an implied employment contract.