Are Verbal Contracts Legal in Tennessee?

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Verbal contracts are legal in Tennessee as long as they do not violate statute of fraud and U.C.C. laws that require some types of contracts to be in writing.

some situations. Like most states, Tennessee has a Statute of Frauds that requires some types of contracts be in writing to be enforceable. It also has adopted the Uniform Commercial Code, which covers commercial contracts and also requires some agreements to be in writing.

Contracts That Must Be in Writing

Tennessee Code Sections 29.2.101 and 47.2.201 specify seven types of contracts that the Statute of Fraud and the U.C.C. say must be in writing. These are:

  1. Contracts entered into by the executor or administrator of an estate
  2. Real estate contracts
  3. Marriage contracts
  4. Contacts that involve a co-signor
  5. Agreements with terms that make it impossible to complete within one year
  6. Purchase agreements for goods valued at $500 or more
  7. Contracts to lend money or extend credit

What Makes a Verbal Agreement Enforceable?

A verbal agreement must include the same elements as a written contract to be legal and enforceable. These are:

  • An offer and acceptance of the offer
  • An exchange of something of value, such as money, property or services
  • Mutual agreement about the terms and conditions of the contract
  • The legal capacity to enter into a contract
  • Legality of the subject matter

Enforcing a Verbal Contract

Lack of evidence is a common issue in enforcing a verbal contract. Although the principal parties and knowledgeable witnesses can testify about the existence and terms of the agreement, Tennessee common law about implied contracts can provide the required evidence. Tennessee law recognizes contracts implied in fact and contracts implied in law.

Contracts Implied in Fact

Contracts implied "in fact" focus on the conduct of one or both parties. U.S. Waste Atlanta, LLC And Clarence Emmer, V. Mark Englund And William Englund, a 2010 case heard by the Tennessee Court of Appeals is one example. In this case, the parties verbally agreed to form a trash hauling business. The defendant provided the vehicles but never transferred the titles. The plaintiff used the trucks and made $39,000 in loan payments, after which the defendant took the trucks back. Upon appeal, the Tennessee Court of Appeals ruled that that conduct of the parties created an implied in fact contract and ruled in favor of the plaintiff.

Contracts Implied in Law

A Contract implied in law, also known as a quasi-contract, focuses on the concept of unjust enrichment, which exists when one party benefits at the expense of the other party. ICG Link, Inc. v. Philip Steen, et al. v. TN Sports, LLC v. ICG Link, Inc., a 2010 case heard by the Tennessee Court of Appeals is an example. In short, this case involved an oral agreement to develop and maintain a sports-related website. The plaintiff created the website but after a long series of maintenance issues the plaintiffs cancelled the agreement with a substantial outstanding balance. However, despite ongoing site maintenance issues, the site had become quite profitable. A Tennessee Court of Appeals ruled in favor of the plaintiff for the value of its services, minus costs the defendants incurred to repair the site, on the basis of unjust enrichment

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About the Author

Based in Green Bay, Wisc., Jackie Lohrey has been writing professionally since 2009. In addition to writing web content and training manuals for small business clients and nonprofit organizations, including ERA Realtors and the Bay Area Humane Society, Lohrey also works as a finance data analyst for a global business outsourcing company.