Enforceability of Oral Contracts

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Contracts are utilized in every type of business and every business owner should know that written contracts should be carefully drafted, reviewed, and negotiated before signing. However, not every business deal is memorialized in writing and many agreements are based on verbal interactions and a handshake. Just as with written contracts, legal disputes can arise over deals that were verbally made. When a disagreement arises, the first question is naturally: is an oral contract enforceable under the law?

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Whether an oral contract is enforceable depends on several factors. The law requires that certain types of contracts be in writing in order to enforce the terms of the contract. Some contracts that may apply to businesses that must be in writing involve the following:

  • Contracts for the purchase or sale of goods that are worth more than $500;
  • Contracts that require more than one year for performance or fulfillment;
  • Contracts for the sale or purchase of real estate;
  • Contracts that guarantee the payment of another’s debt.

While contract law sets out the above categories, over time, different exceptions have developed to the writing requirement. For example, if a contract covers more than one year but the actual end date of the contract is indefinite, the agreement may be enforceable. In addition, if you have already performed part of your end of the contract, a court may look favorably on that fact and determine part or all of the oral agreement will be enforceable. An experienced business contract litigation attorney can evaluate your case and raise any possible defenses to prevent liability or losses whenever possible.

While the law requires certain contracts to be written, it is generally a good idea to write down and sign almost any business deal you make. Even deals that seem relatively minor with individuals or businesses you trust can go sour and result in a legal dispute. People forget what they agreed to or can even lie about any agreement.  Even though an oral contract may be legally enforceable, in court it may come down to your word against someone else’s. For these reasons, it is always best to consult with an attorney about drafting a written contract to ensure the terms of the agreement are clear and enforceable.

Discuss your Case with an Experienced Business Litigation Attorney

If you are facing a dispute over any type of contact–oral or written–your first call should be to a skilled business attorney who has a thorough understanding of the complex contract laws in California. At Structure Law Group, our experienced business lawyers can represent the interests of your business and will strive for the most favorable results in your contract dispute. Please contact our office by calling 408-441-7500 or by using our online contact form.