What Is a Breach of Verbal Contract?

KEY TAKEAWAYS

• Verbal contracts are legally enforceable agreements

• A breaching party may commit an actual, anticipatory, material or minor breach

• It can be challenging to pursue of claim for breach of verbal contract due to the lack of written evidence

A breach of a verbal contract occurs when one party fails to perform its contractual duties by the time performance is due. Although verbal agreements are not memorialized in writing, they are still legally enforceable. Breaches can range from failure to deliver on time to failure to pay for goods. Below, let's explore the various types of breaches.

Types of Breach 

There are four categories of contract breaches that you may pursue in a contract dispute. They are as follows:

• Actual Breach: An actual breach occurs when a party refuses to fulfill its end of the contract or only partially fulfills it.

• Anticipatory Breach: An anticipatory breach occurs when one party tells the other it will not perform. They do this before their duties are due.

• Material Breach: A material breach occurs when one party fails to fulfill one of the contract's core elements after the other party has partially or fully performed. This type of breach terminates the contract and allows the harmed party to sue for damages or other potential remedies such as specific performance.

• Minor Breach: A minor breach occurs when a party to a contract fails to meet a minor obligation. Breaking a minor contract term does not end the contract or free the other party from its duties. If this occurs, the breaching party may have a reasonable amount of time to cure the breach upon being given notice of the breach by the non-breaching party.

Elements of a Valid Oral Contract

All the essential elements must be present for an oral contract to be enforceable. Otherwise, a claim for breach cannot succeed. It must include:

• Offer and Acceptance: The person who offers the agreement must clearly indicate their willingness to enter it. This gives the offeree the power to accept and agree.

• Consideration: The agreement must involve something of value being exchanged. The person making the promise must offer something in return for their promise.

•  Mutual Agreement: For an agreement to be valid, both parties must agree to the terms set forth. These terms need to be offered and accepted.

• Legality: Any agreement that is legally binding must involve goods or activities. Agreements that involve unethical practices are not considered valid if they go against public policy.

• Capacity: Both parties entering into the agreement must have the capacity to do so, meaning they understand what they are agreeing to and are not under any impairments like being a minor, mentally unsound, or under the influence of drugs or alcohol when agreeing.

Challenges in Enforcing Verbal Contracts

Proving that a verbal contract exists is often quite tricky. Without a written contract, many plaintiffs have evidence of verbal agreements.

To help show there was an enforceable contract with a resulting breach, you can show the following as evidence:

• Affidavits from witnesses 

• Emails, texts, or call log

• Evidence of the plaintiff’s performance and lack of defendant's performance 

• Credit card statements

• Check payments 

Legal Methods to Break a Verbal Contract

Although oral contracts are enforceable, there may be some legal ways to get out of the contractual obligation, especially if the other party has not yet performed or acted to their detriment in reliance on the contract.  A party may consider writing to the other party to outline reasons for not fulfilling the contract and seek mutual agreement to terminate it. Both parties to the contract could also mutually agree for both parties to be released from their contractual obligations.
 

A party to the contract could also show that the agreement is not legally enforceable because it is covered by the Statute of Frauds.

Statute of Frauds

The Statute of Fraud requires specific contracts to be in writing to be valid and enforceable The following contracts must be evidenced by writing to be enforceable:

• Prenuptial and postnuptial agreements

• Sales for products over $500 (this value may vary by state)

• Sale or transfer of land

• Contracts that take more than a year to fulfill

• Agreement to buy someone else's debt

• Agreements by executors to resolve debt owed by someone who died

Steps to Sue for Breach of an Oral Contract

Although it can be tough going after a breach of oral contract claim, it is not impossible. To win a claim, you have to prove the oral contract exists by showing its terms. You will also have to show that the other party didn't meet their duties or promise to perform, that you acted to your detriment in reliance on the terms of the contract, and that you were actually damaged as a direct cause of the breach.  If you have evidence of all of these elements, you may be able to recover your damages by filing a claim in civil court.

It is recommended to seek guidance from a lawyer. However, here are a few basic steps for pursuing an action for breach of contract below:

The following are the basic steps you’ll take to file a claim for breach of contract: 

1. Prepare and file your claim in the appropriate Court. 

2. Pay the filing fee or request a fee waiver if you are eligible.

3. Serve the defendant in a manner accepted by the courts in your jurisdiction.  This can be through either: certified mail, substitute service on a person other than the defendant, or personal service by a process server or a sheriff.

4. Provide the Court with evidence that the defendant has been properly served by filing an appropriate proof of service. 

Statute of Limitations

Depending on the jurisdiction, the statute of limitations for verbal contracts is usually 1-3 years, and typically begins on the date of the breach. The statute of limitations varies by state. You’ll have to check with your local jurisdiction to find out how long you have to bring your case to Court.

Final Recommendation: Protecting Yourself in Verbal Agreements

Navigating the Court system and gathering enough evidence to provide a claim can be overwhelming, but you don’t have to go at it alone. Always work with an attorney when you are facing a breach of contract issue.

Frequently Asked Questions 

Are verbal agreements binding?

A verbal agreement is a contract, even though it is not in writing. Assuming the contract is valid, it is a binding agreement between two parties or businesses. 

While certain verbal contracts are considered enforceable under the law, they are problematic and complicated as the amount of information often varies for each case.

Enforcing an oral contract often leads to "he said, she said" situations that are more difficult to validate without proper evidence of the specific terms of the agreement.

How To Break A Verbal Contract Legally 

There are times when a verbal contract needs to be broken, and it is often possible to do so legally. Not only that, but approaching it in a healthy way can give you a chance to maintain a personal or business relationship.

The existence of verbal contracts, as well as any cancellations of them, are most enforceable when they include written evidence of the terms and intentions of the parties, whether in emails, text messages, or other correspondence.

Thus, to legally break a verbal contract, you should do so in writing. In that correspondence, outline the terms that had been agreed upon and why you are not able to fulfill them. Ask the recipient to respond acknowledging receipt and that they understand the situation, thus relieving you of the need to fulfill the contract.

This way, should the other party attempt to take you to court, you have written evidence that you were released from the contract by that party.

What are the remedies for breach of verbal contract?

There are several remedies for a breach of contract claim. If you are involved in a breach of contract claim, you may (1) amend the contract, (2) terminate the contract, (3) sue for damages, or (4) negotiate and settle.

What are the rules of a verbal contract?

Verbal contracts follow the same rules as written contracts. Unless the Statute of Fraud covers the contract, the contract must be proven by evidence of an offer and acceptance, mutual consent, valid consideration, legality, and capacity.

What voids a verbal contract?

A verbal contract can become void for several reasons, such as : (1) one or more of the parties was placed under duress, (2) one or more of the parties lacked the capacity to contract, (3) there is evidence of fraud, (4) the contract violates the statute of frauds, or (5) the contract is illegal.

How do I get out of a verbal agreement?

Since verbal contracts are legally binding agreements, to get out of one, you will need to negotiate with the other party to the contract, or express your written intent to cancel the contract before the other party has begun to perform.  If the other party has acted in reliance on the contract and then refuses to cancel the contract, you will still be obligated to perform your contractual duties.

Can I sue someone for backing out of a verbal contract?

Yes, you can sue someone for backing out of a verbal contract. Although the contract is not in writing, it is still legally enforceable, and as such, all parties are required to perform their contractual obligations.

Can you change your mind after a verbal agreement?

If you change your mind about a contract term or the contract itself, you can try to express in writing that you want to terminate the contract before either party acts on the terms of the contract, otherwise you’ll have to work with the other party to the contract to negotiate new terms.

Can you terminate a contract if you are in breach?

If you are the breaching party, you cannot terminate the contract unless the other party agrees to terminate or modify the contract terms. However, if you are the non-breaching party, you can terminate the contract and may sue for damages or other remedies such as specific performance.