It is surprising how many people think oral agreements are not valid or enforceable.
The correct answer is that oral contracts are entirely valid and enforceable, unless made invalid by a particulate statute or regulation.
Of course, a problem that can easily arise is figuring out what the terms are for a particular oral agreement, if the parties later disagree about what they initially agreed were the terms. Countless lawsuits, often very costly, have addressed the issue. A word to the wise: oral agreements are not recommended for situations involving (among other factors) considerable risk or financial exposure, or where they are expected to remain in effect for a long period of time, or where there are multiple or varying parties.
And what about those contracts requiring a written form? What are they? The starting point is referred to as the Statute of Frauds, that every state in the Union has adopted in one form or another (but not identical).
The Statute of Frauds is a descendant of multi-hundred year-old English common law, from which much of our state law in the U.S. was descended. In California, the Statute of Frauds appears in Civil Code §1624, and invalidates certain contracts “…unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party’s agent”. The law’s list of such contracts which must be in writing includes those that:
- May not be performed within a year.
- Guarantee someone else’s debt, with some exceptions.
- Are leases for more than one year.
- Are for the sale of real property or an interest therein.
- Are agreements to retain someone as an agent to buy or sell real estate for you, or lease it for you for more than one year.
- Are agreements that by their terms are not to be performed during the life of the promisor.
- In most circumstances, are a mortgage or deed of trust.
- Are a loan or grant of credit for more than $100,000, with certain exceptions.
In addition, other laws may define specialized situations in which a written agreement is required. For instance, the Uniform Commercial Code has such requirements for certain types of materials purchase agreements.
But what’s a “writing” that meets legal requirements? Is an unsigned email sufficient to create a binding legal contract? It’s an interesting question, with a complex answer. In California, that issue is addressed in the Uniform Electronic Transactions Act, beginning with Civil Code §1633.1. We’ll provide more information about that next month.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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