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Is a verbal agreement legal?

Updated on June 4, 2012

The Notorious Oral Contract

Most of us have at least heard of the terms "verbal agreement" or "oral contract". It means exactly what it sounds like - two or more people enter a contract with nothing more than a handshake and have no written document to evidence their agreement. The general rule is this - oral contracts are legal. Most of the transactions we enter on a daily basis do not require a writing to be legal. I'll give you a few examples (although the possibilities are infinite):

  1. I see my neighbor using an old push-mower on his yard and I want it. I yell to him across the street "Hey, I'll give you $75 for that mower." He yells back "Sure! $75 sounds great for this old thing." We have entered a legally enforceable contract.
  2. After I get the push-mower, I see the neighbor's son across the street and yell to him "If you mow my yard with your pop's old mower by the weekend, I'll give you $20." He doesn't say a word because he's a brat. The kid starts thinking he could use some cash for the weekend so he comes over on Friday while I'm out and mows my yard. We've made a contract.
  3. My other neighbor, a sweet old lady that makes the best peach cobbler west of the Mississippi, needs her yard mowed. I say to her, "I'll mow your yard for one of those peach cobblers." She says, "I'll have it baked by the time you're finished." We've got a tasty contract.

As you can see from the above, nearly any agreement two people enter constitutes a contract, whether written or not. There are some major exceptions I'm going to talk about below. Oftentimes the biggest problem with oral contracts is proof. An old saying about verbal agreements is "they're as good as the paper they're written on." This can be true.

Take example one above. Suppose I decided I didn't want that mower after all. The neighbor pushes the mower across the street to my yard, knocks on my door, and says "here's the mower - I'll take cash or check." I look at him and say, "Nah, I don't want it anymore."

"BUT WE HAD A DEAL!"

"I don't want it anymore, sorry."

The neighbor and I did have a deal. I've breached our contract. But how can he prove that we ever had a contract? He can't.

The situation is different with example two. If the son comes over and mows my yard, and then I try to back out of the deal, I wouldn't be able to because he performed. Teenage brats don't mow yards for free. He would have sufficient evidence of some kind of agreement. He wouldn't be able to prove how much I offered him though - I could say, "I only offered $15 - he's crazy saying $20."

Or, flip it around, suppose the kid mows the yard and then says "I'll take my $40." How can I prove I only offered him $20? I can't.

I know these sound silly, but oftentimes much larger deals are struck with nothing more than a handshake and the same problems crop up. A business is sold on a handshake for thousands of dollars; the person pays; and then the seller only conveys 2/3 ownership of the business. The buyer now has to fight an uphill battle proving he bought all of it instead of 2/3.

Bottom line is that if you're making a deal of sufficient value or a deal that has multiple parts - get something in writing evidencing what you're doing - no matter how well you know or trust the person you're dealing with. (I just finished a case where two brothers sued each other over a verbal contract. The agreement was worth $400,000 so I would probably sue my brother too if he didn't pay up!) It doesn't have to be fancy - it can be on a cocktail napkin but it needs to be signed by the person you're dealing with.

If you're not going to get something in writing, another simple way to help prove the agreement is to have a witness (or two) to the transaction. With a witness, It's not just you're word versus their word - you now have additional corroborating evidence of the agreement in the form of witness testimony.

The Statute of Frauds

The general rule is that verbal agreements are enforceable. An exception to this is when the Statute of Frauds applies. When the statute of fraud applies, there has to be a writing signed by the parties sought to be bound. I've got a hub on this specifically but generally, the Statute of Frauds applies to contracts dealing with:

  1. Interests in land (including leases and easements for more than one year)
  2. Promises in consideration of marriage ("If you marry my son, I'll buy you two a car.")
  3. Promises to pay another's debts - suretyship ("Sell him the boat and if he doesn't pay you, I will."
  4. If an executor promises personally to pay estate debts.
  5. A promise that by its terms cannot be performed within one year.
  6. Goods priced at $500 or more

I hope you now have a working understanding of verbal agreements and their legality. Be sure to read my hub on the Statute of Frauds because it also has exceptions.

Comments

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    • artofadulthood profile imageAUTHOR

      artofadulthood 

      6 years ago

      Thank you so much for the kind comments and warm welcome!

    • homesteadbound profile image

      Cindy Murdoch 

      6 years ago from Texas

      I love your sense of humor on this, and how you make me smile when I read about these legal matters. Welcome to hubpages. It is truly a wonderful place to be, and I am sure you will love it here.

    • Alastar Packer profile image

      Alastar Packer 

      6 years ago from North Carolina

      A verbal agreement isn't worth the paper it's written on.~ Samuel Goldwyn malapropism.

    • artofadulthood profile imageAUTHOR

      artofadulthood 

      6 years ago

      Thanks Sharyn! I feel the same about "hopping" onto one of your hubs! I figure the law is dull enough so I try to liven it up any chance I get!

    • Sharyn's Slant profile image

      Sharon Smith 

      6 years ago from Northeast Ohio USA

      This is a great hub. I learned and giggled too. I appreciate your bits of humor thrown in. Welcome to HubPages. I'm glad you found me so in turn I found you. I'm going to share this on FB. Best wishes!

      Sharyn

    • artofadulthood profile imageAUTHOR

      artofadulthood 

      6 years ago

      Thanks Judi Bee - that means a lot!

    • Judi Bee profile image

      Judi Brown 

      6 years ago from UK

      Good explanation with clear examples - very interesting.

      Voted up etc

    • artofadulthood profile imageAUTHOR

      artofadulthood 

      6 years ago

      Sound advice tamarawilhite. So many disputes would never happen if only agreements were put in writing from the beginning.

    • tamarawilhite profile image

      Tamara Wilhite 

      6 years ago from Fort Worth, Texas

      Verbal agreements are too vulnerable to "he said - she said" disagreements. If it is serious, put it in writing.

    • artofadulthood profile imageAUTHOR

      artofadulthood 

      6 years ago

      Trueflame: Thank you! A hub on promissory estoppel is next on my list in the law of contracts group. I hope it will be reader friendly.

      DS Duby: Thank you so much! I hope your legal matters reach a favorable resolution soon!

    • DS Duby profile image

      DS Duby 

      6 years ago from United States, Illinois

      Very interesting hub, you certainly hit on all the factors of an oral agreement, I am actually in a dispute right now over a contractual agreement that includes an oral agreement. Thanks for the info. Voted up and useful.

    • profile image

      Trueflame 

      6 years ago

      Very nice and clear. Are you going to be continuing on this topic? If so, I'd love to hear your explanation of promissory estoppel. I always found that concept blurry and unclear, pretty much like anything else in law that involves abstract notions of "reasonableness."

    • artofadulthood profile imageAUTHOR

      artofadulthood 

      6 years ago

      Thanks Francesca! Very new to this but having a blast with hub writing so far.

    • Francesca27 profile image

      Francesca27 

      6 years ago from Hub Page

      Nice hub. I truly enjoyed it.

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