Enforcement of Oral Contracts
ENFORCEMENT OF ORAL CONTRACTS
Most people have heard the saying “an oral agreement isn’t worth the paper it is written on.” While it is true that oral agreements are more difficult to enforce in court, enforcement is not impossible. However, because of the many viable defenses to enforcing an oral agreement, it is important to retain an experienced attorney to help navigate the claim.
ARE ORAL CONTRACTS ENFORCEABLE
The answer is a resounding “yes.” At its core, a “contract” is simply a set of promises made by two or more people involved in a transaction. To be legally enforceable, contracts must be made for a legal purpose by parties who are legally competent to contract. Whether a contract is written or oral, parties form an enforceable agreement when there is an offer by one party, an acceptance by the other party, and consideration (meaning an exchange of something for the thing received). Thus, for example, a contract to paint a home may be formed – even in the absence of a written agreement – by the owner offering a painter the job of painting the outside of his home (offer), for the sum of $1,000 upon completion (consideration), and the painter’s agreement to perform the job for the amount offered (acceptance). Oral agreements are binding and enforceable unless subject to an exception.
Given the exceptions to enforcement, however, some of which are set forth below, we advise clients to always get a written agreement. Even if it is not feasible to get a written contract, once you have agreed to terms, send a text message or email laying out the relevant terms of the agreement and asking the recipient to “correct anything you misstated or add anything you might have missed.” While this will not necessarily transform your oral agreement into a written one, at the very least, it will help establish the terms of your deal, which parties often recall differently after time passes.
If it becomes necessary to pursue a breach-of-contract claim in court to enforce an oral agreement, the plaintiff will need evidence to establish the existence of the agreement, which defendants often outright deny. Potential evidence includes (i) text messages/emails about the deal, (ii) proof of payment (such as checks, bank transfers, Cash App, Venmo), and (iii) witnesses to the agreement or performance of the contemplated duties.
UNENFORCEABLE ORAL CONTRACTS
There are many defenses to the enforceability of an oral contract, so beware. Some of the primary defenses are below.
The Agreement Lacks Essential Terms
The primary difficulty with enforcing oral agreements is that they often fail to identify the “essential terms” of the parties’ contract. Under Florida law, the acceptance of an offer which results in an enforceable agreement must contain a meeting of the minds regarding the essential terms contained in the offer. As a result, a party suing on an oral agreement must identify and allege the essential terms of the parties’ agreement.
Although the phrase “essential terms” is amorphous and varies widely based on the nature and complexity of a given case, essential terms to a contract often include the following:
- What specific task is to be performed? For instance, an agreement that someone will pay $10,000 for “an interest” in a business is likely too vague to be enforceable because it does not specify whether the payment was made in exchange for an ownership interest and, if so, for what ownership percentage.
- The timing allowed for performance.
- The amount of consideration and the timing of any required payment.
A litigant’s failure to adequately allege the essential terms of an oral agreement will likely lead to dismissal of the lawsuit and an inability to recover.
Statute of Frauds
Florida law requires certain contracts to be in writing signed by the party against whom enforcement is sought. As a result, if your oral agreement involves one of the topics below, a Florida court is not likely to enforce it.
- Contracts in consideration of marriage (including prenuptial agreements)
- Any agreement to transfer an interest in land, including buying/selling land.
- Contracts that are not to be performed within one year from the making thereof. However, contracts made for an indefinite duration, or contracts which could be canceled at any time, are not necessarily barred.
- Contracts for payment of someone else’s debts.
- Contracts for the sale of goods with a total value equal to or exceeding $500.
Even if your oral agreement falls within the statute of frauds, depending on the circumstances, you may still have arguments for enforcing the agreement including, in certain instances, (i) your full or partial performance of the contract, (ii) the party against whom enforcement is sought admits to the terms of the contract, or (iii) promissory estoppel, meaning that one party relies to her detriment on another party’s promise.
Statute of Limitations
The statute of limitations refers to the amount of time a person has to bring a claim in court. With respect to oral agreements, the statute of limitations in Florida is currently four years (it is five years for written contracts). Accordingly, you must file your breach of contract claim within four years of the date you contend the opposing party breached their agreement with you or the agreement may be deemed unenforceable.
New Deal Without New Consideration
As set forth above, consideration is a necessary element of every contract, including modifications of an existing contract. Let’s say, for example, you agree to invest $25,000 in a business for a 10% ownership interest. A year later, because you’re a valued member of the ownership team, the other owner agrees to sweeten the deal and give you 20% of the company, instead of the 10% deal you previously struck. Even though both parties agreed on the increased ownership percentage, a court could determine that there was no additional consideration given for the additional ownership percentage (you still paid only the original $25,000), so the modification was unenforceable for lack of consideration. Remember that each agreement and each subsequent modification needs to be supported by consideration.
If you are involved in a dispute regarding an oral agreement, contact the Law Offices of Moneyede Martin, P.A. today for help!
Disclaimer: This blog post is not intended to provide legal advice or suggest a guaranteed outcome of any particular dispute. Each case depends on its specific, unique facts. Though the blog post seeks to outline the general law, it does not endeavor to identify every rule or exception regarding the referenced topic. Nor does this post reflect any changes in law that have occurred since it was posted. Readers considering legal action should not rely on this blog post but, instead, should consult with an experienced lawyer to understand current laws and how they may affect the reader’s specific case. For legal advice on the information provided and related topics, please contact the author.
