Breach of Verbal Contract: Everything You Need to Know
A breach of verbal contract can occur when an agreement is in place between two parties but one party fails to comply with the agreed-upon terms.3 min read
2. Suing for Breach of an Oral Contract
3. Statute of Frauds
4. Statute of Limitations
Updated June 23, 2020:
A breach of verbal contract can occur when an agreement to do something, sell something, or buy something is in place between two parties and one party fails to comply with the agreed-upon terms.
Elements of a Contract
An oral contract is a spoken agreement between parties that is sometimes legally binding. An issue that arises with proving an oral contract is the lack of tangible evidence.
An oral contract legal case often relies on the fact that one or both parties are clearly relying on the agreement. Verbal contracts are best as a simple agreement with easy-to-understand terms and evidence that the agreement exists.
All contracts, whether verbal, written, or implied, have certain elements to be considered valid.
- There must be an offer and an acceptance where one party proposes an arrangement and the other party accepts.
- Both parties must give something up in exchange for the contract.
- Whatever is given up must have an actual value.
- There must be mutual consent.
- Both parties must be aware that a contract is being created and they must both be aware of its terms.
- There can be no valid defense to enforcement of the contract such as a minor filing suit or a lack of mental capacity.
- If fraud or duress is claimed, this may prevent the contract from being enforceable.
Even if someone acts on your statement, it does not mean a contract has been formed if the following applies:
- You agreed to do something illegal. Any violation of a local, state, or federal law cannot be enforced in a contract.
- The terms of the contract were not specified. The contract must state a specific action or amount.
- There was a misunderstanding regarding a fundamental part of the agreement.
- The terms or subject of the contract are prohibited under law. An example would be a real estate contract, which must be in writing.
Suing for Breach of an Oral Contract
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. While certain oral contracts are considered enforceable, they are problematic and complicated.
The enforcement of an oral contract often leads to "he said, she said" situations that are difficult to validate without proper evidence. Because of what can turn into a battle between the two parties, it is recommended to consult with a contract lawyer and have a written contract drawn up.
A complication the court runs into with verbal agreements is it must be able to extract key terms of the agreement to enforce, which may prove to be difficult if the two parties do not agree on those terms. The two parties may not agree that there was even an agreement in place.
The party that wants the agreement to be enforced has the difficult task of proving the terms of the agreement as well as the existence of a verbal agreement.
Some options are available for one party to provide proof. These include:
- Evidence to the court of the plaintiff's performance of services called for in the contract
- Proof of any money exchange showing a deal was made
- Proof of a loan and payments
- A check written as a down payment or deposit
- Witnesses present at the time the agreement was made
- Documentation such as correspondence and also emails and text messages corroborating your testimony can be helpful in oral contract disputes
Statute of Frauds
There are situations where an oral contract is unenforceable if it falls under the purview of the Statute of Frauds, which requires a written agreement for situations including:
- Transferring the ownership of land
- Contracts that cannot be fulfilled within a year
- Ensuring the debt of another person
- Assuming the role of executor of a will
- The sale of goods above a certain value. The Uniform Commercial Code governs contracts involving the sale of goods.
Statute of Limitations
The statute of limitations is the time limit in which one party must file a lawsuit against the other party to recover damages if there is a breach of contract.
In the case of verbal contracts, these usually have a shorter statute of limitations timeframe when compared to the timeframe for written contracts. This is due to the need for fresher evidence and witness testimony to be provided.
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