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Oral Contracts: why you should probably save your breath

One question we lawyers often get asked (in addition to, “Have you seen Legally Blonde?” and “How much is this gonna cost me?”) is,

“Are oral contracts valid?”

Answer: you’re damn skippy!

Oral contracts, as long as they have all of the formal contract elements–offer, acceptance and consideration (something given in exchange for something received)–are as valid as those new fangled written contracts. However, just because oral contracts are valid, doesn’t mean that they are a good idea. In fact, our (very learned) opinion is that they are a pretty bad idea most, if not all, of the time. Why? We’ll tell you (fa’ free!).

The purpose of contracts is for the parties involved to make known the mutual expectations of the agreement made between them. The purpose of written contracts is so the parties are reminded of their obligations and for them to have something to point to (or to point a judge to) if a dispute arises.

A typical contract dispute involves one party accusing another party of some form of non-performance and the accused party in turn denying the accusation with some form of “I did what I was supposed to,” “I never promised to do X,” or “That’s not what we agreed,” blah, blah, blah. When said contract goes to court, the lawyers will first look at what the contract says  and then look for evidence to prove that their client has lived up to the contract. Although suits over written contracts can get pretty complicated, the adjudication of a dispute is made infinitely easier and more reliable by having the words of the actual contract to refer to.

But, what if there is no written contract?…

See, the problem with oral contracts is not that they aren’t valid, it’s that they are tough to enforce. With an oral contract, there’s no written agreement to show to a judge when the wheels fall off. So, when a dispute arises it becomes a he/she said he/she said kind of a situation, which is pretty unpredictable and might not lead to the most fair outcome.

For example, if you make an oral agreement with us and we later decide we don’t wanna go through with it, all we have to do is claim that we never made the agreement, or that we don’t remember it. Hell, we might even pretend that we don’t even know who you are. Then, it would be on you to present convincing evidence that we did, in fact, make the agreement. You could bring witnesses who saw us make the agreement, but what if there weren’t any? Or what if the witnesses you bring are drunk, or have creepy mustaches, or appear otherwise in such a way that the jury finds them not credible, so they rule against you even though we are the liars (muah, ha, ha…)?

That would suck, right? Know what would’ve prevented it?  A freakin pen and a piece of paper. Your business it too important to seal any deals with some sweet words and a handshake. If you want to protect your business (and your wallet) agree in writing, with proper signatures. Always. Oral contracts aren’t worth it. Save your breath for more important things (like breathing).


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