your Verbal Agreement worth the “Paper” it’s
The title of this article is of course
written tongue-in-cheek. Is a verbal
agreement enforceable in court? The
answer, as with most legal questions, is that it depends on the specific facts
and circumstances, or in other words – it depends.
As a general rule, verbal agreements are
generally enforceable under the law. I
stress the word generally here because there are numerous specific
circumstances in which a verbal agreement is not enforceable.
Before getting into the exceptions to the
general rule, it is important to first ensure that you in fact have an
agreement. Like any contract, a verbal
agreement must fulfill the elements of a contract, generally. The elements of a contract are an offer, an
acceptance, and consideration.
In order to form a contract, the offer
and acceptable must match exactly, or be a “mirror-image” of one another. If, for example, Bob sends a proposal to
Charlie to replace a door for $200, and Charlie sends an email back to Bob that
says “I accept your proposal, please complete the job by tomorrow”, it is
unlikely that the parties have a contract.
The reason that no contract was formed was that Charlie included a new
term in his “acceptance” that was not contained in Bob’s offer; that is he
imposed a deadline that was not part of the previous communication.
“offer” is a defined as a reasonably definite proposal made by one part to
another under circumstances indicating an intent to enter into a contract. The offer must be reasonably definite. This means that it cannot leave material
terms unresolved. “I’ll sell you a car”
is not an offer because it lacks the definiteness required. I’ll sell you this 1957 Chevrolet convertible
sitting in my driveway for $15,000 if you can complete the purchase within a
week” on the other hand is more likely to be an offer. It is definite as to the price, timeframe and
substance of what is being exchanged in the contract.
An “acceptance” is an agreement by the
party to whom an offer has been made whereby that person unconditionally
accepts the terms of that offer. For an
acceptance to be valid, it must be unconditional. So in the example above, if the listener says
“I accept” after hearing the statement about selling the Chevrolet for $15,000,
the parties likely have formed a contract.
In order to form a contract, no material or important term can be left
for future discussion or resolution. The
acceptance must be a mirror-image of the offer.
If it is different in any material way, it will not be an acceptance,
but will be what we call a counter-offer.
A counter offer acts as a rejection of the initial offer and sends a new
offer back to the original offerror for consideration.
All contracts, including verbal one, must
also be supported by consideration. Consideration
can be anything of value to the other contracting party. In order to have a contract, each party to
the contract must tender or promise some consideration. If I promise to give you five dollars on
Wednesday, there is no contract, because there is no consideration for my
promise. If on the other hand, I promise
to give you five dollars on Wednesday and you promise to make me a sandwich in
exchange, then we have a bargained for exchange, that is consideration. Your promise to make me a sandwich is
consideration for my promise to pay you five dollars.
types of contracts must be in writing by law.
This is required by what attorneys sometimes refer to as the “Statute of
Frauds”. A contract for the sale of
goods at a price of $500 or more is subject to the statute of frauds and not
enforceable if not in writing. A surety
contract, that is where one person is answering for the debt of another, such
as a personal guaranty, is subject to the statute of frauds. An agreement made on consideration of marriage
is subject to the statute as is a contract which cannot be performed within a
There are some situations where a court
will enforce a contract despite it not meeting the requirements of the statute
of frauds. Generally these fall into two
categories- estoppel and partial performance.
To establish an estoppel, sometimes called promissory estoppel, a
plaintiff must show four things: (1) a clear and definite promise by the
defendant; (2) where the defendant has a reasonable expectation that the promise
will induce action or forbearance on the part of the plaintiff; (3) which does
induce actual and reasonable action or forbearance on the part of the
plaintiff; and (4) which causes a detriment which can only be avoided by
enforcement of the promise.
doctrine of part performance is premised on the notion that allowing a party to
escape his obligation after he has permitted the plaintiff to perform in
reliance on both the agreement and the defendant’s inducements would effect a
fraud upon the plaintiff. Part
performance is not really a substitute for the writing required by the statute
of frauds as much as it is a means to estop the defendant from asserting the
statute of frauds as a defense.
you can imagine, the analysis involved in determining the enforceability of a
verbal contract can be quite complicated.
There are many nuances that can affect each party’s rights concerning a
The information contained on
this page is provided as general information and does not constitute legal
advice. The experienced attorneys at
Baldwin, Briscoe & Steinmetz, P.C. can assist you if you have questions
concerning a contract, including verbal contracts. We’d be happy to sit down with you and review
your situation and provide appropriate advice.