Table of Contents:
- Is a Verbal Agreement Binding in New Jersey?
- Are Verbal Agreements Binding in Maryland?
- Are Verbal Contracts Legal in Tennessee?
- Is a Verbal Contract Legal in Texas?
According to New Jersey law, most verbal agreements in the state are binding. However, someone hoping to enforce the contract has the legal burden of showing that a valid contract existed. This task can be more complicated when the terms of an agreement are not spelled out in a written contract.
Elements of a Binding Contract
For any contract to be enforceable in New Jersey, whether verbal or written, certain elements must be proven. For example, the person seeking to enforce the contract must show that one of the parties made an offer of some sort and that the other party accepted this offer. Consideration is also required, which is something of value that each party gives up in order to form the contract. The parties must have had a meeting of the minds as to the terms of the contract. The terms must also be reasonably certain so that a court can see the basis of the agreement.
In addition to the other elements of a contract mentioned above, employment contracts require additional elements. New Jersey is an at-will employment state, meaning that either the employer or employee can terminate the relationship for any reason, so long as it is not an illegal reason. To get an employment relationship out of this realm, the employee must prove three things:
- There was a definite, clear oral promise of employment;
- The person making the promise of employment was authorized to make it and bind the employer to it; and
- The employee relied upon this promise
Statute of Frauds
Some types of contracts must be in writing and signed by the person against whom enforcement is sought or the court will not enforce them. In New Jersey, this includes contracts regarding:
- agreements based upon the consideration of marriage
- loans for more than $100,000
- agreements by creditors to forbear their rights to seek a remedy based on a contract or promise
- agreements to provide support to another person who is not his spouse
Proof of Contract
The issue with many oral contracts is not whether they are actually binding but rather if they can be proven. Whereas a written contract can be analyzed by the document itself, oral contracts require additional proof that they actually exist. A court can consider the relationship between the parties and if there are any documents that indicate the existence of an oral contract. For example, proof of an oral contract may consist of a check in which you paid for a service or goods, the fact that you are in possession of the goods or the fact that the other party began a service. Communications between the parties sent via email or text message may also help establish that a contract existed.
For a verbal agreement to be binding in Maryland, it must fulfill three elements. First, both parties must indicate their intent to enter into the contract. Second, the person to whom the contract is being offered must accept the terms of the contract. And third, both sides must exchange something of value. Additionally, a verbal agreement made in Maryland must provide a clear definition of a breach of contract, and offer an appropriate means of restitution.
In Maryland, verbal agreements are as binding as written contracts, with some exceptions pertaining to Maryland's "statute of frauds". According to Maryland's statute of frauds, if more than $500 worth of goods is to be exchanged, the parties must put the details into a written contract, which then must be signed. Verbal agreements in Maryland are also not binding if they govern actions which take longer than one year to complete.
Verbal agreements are easily contested, particularly without impartial witnesses. It is best to consult with a legal professional before entering into a verbal agreement in Maryland.
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
- Contracts entered into by the executor or administrator of an estate
- Real estate contracts
- Marriage contracts
- Contacts that involve a co-signor
- Agreements with terms that make it impossible to complete within one year
- Purchase agreements for goods valued at $500 or more
- 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
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
Texas, along with other states, allows verbal or oral contracts with some exceptions. Just because a verbal contract is legal doesn't mean it's provable, however. If you can't prove what is in a verbal contract and that it was truly and fully agreed to by the parties, then it's not enforceable. An unenforceable contract is little better than no contract at all.
Verbal Contracts Prohibited by Texas Law
R. Scott Alagood, a partner in Texas law firm Alagood, Cartwright Burke PC, notes on the firm's website that certain verbal contracts are prohibited by law in Texas. These include:
• An executor's promise to pay the debts of a decedent
• Marriage agreements. Prenuptial agreements are also generally prohibited
• Real estate agreements that are either contracts for sale, lease agreements for longer than one year, or related to real estate commissions
• Any agreement for a performance not completed within one year
• Medical care agreements, promises or warranties other than those made by licensed pharmacists.
• Loans from certain financial institutions
• Contracts for $500 or more for the sale of goods
• Agreements related to a lawsuit
Verbal Contracts That Are Generally Enforceable
Under Texas law, a verbal contract is generally enforceable if the following elements can be proven:
1) There is an offer made
2) The parties are agreed and in strict compliance with the terms of the offer
3) There is a "meeting of the minds" with respect both to the agreement and all its essential terms
4) There is a communication of acceptance by each party to the terms of the agreement.
Uses and Limitations of Verbal Contracts
Texas is one of the few states where verbal contracts have the same statute of limitations as written contracts. For both written and oral contracts you have four years from the time of a breach of contract to bring a lawsuit for contract violation.
As an interim agreement, verbal agreements can work well, allowing a work process to begin immediately while contract details are still being worked out. Verbal contracts are common in the film industry, for example, where a composer or film editor may be brought into an ongoing project with a tight deadline. Once the composer's or editor's agent reaches an oral agreement with the film company -- usually with a short phone call -- work begins while the film company's lawyers prepare the written agreement that may take weeks for completion and signature by all parties.
Nevertheless, verbal contracts are of limited value because the existence of the contract -- and especially of its terms -- are difficult to prove in court. In most cases, for the opposing arguments to consist of anything more than "he said...she said," there has to be corroboration by witnesses. As time goes on, memories become inexact or witnesses are no longer available. For these reasons, a Nolo article,"Ten Tips for Making Solid Business Agreements and Contracts," makes its number one tip "Get it in writing."