Yeah, I hate oral contracts. I don’t even hate them for the same reason everyone else does. They’re just so boring. It’s a topic I’ve spent way too much time in my life on because everyone on the internet has their own bad opinion about them.
Are They Enforceable?
Firstly, yes, most oral contracts are enforceable. By default, all contracts are enforceable unless there is a reason they are not. They’re subject to the same enforceability rules as written contracts, except in one circumstance. Some contracts must be in writing in order to be enforceable. This is the Statute of Frauds. Contracts transferring real estate or the sale of goods over $500 are two common examples.
The He Said She Said Nonsense
Here’s where I get annoyed. You’ll see all over the internet that the biggest problem with oral contracts is proving there was one and that it is a he-said-she-said situation. To some extent this is true. However, the law is deeper than this. It’s as though this has come up once or twice in the centuries that oral contracts have been allowed.
You can prove the existence of a contract in many ways, not just the words spoken. For example, if your customer hires you to build a website but doesn’t pay. Then, if the person claims there was no contract, the court is going to look at all the circumstances. A judge knows that people don’t build websites for free, especially if they do it professionally.
Additionally, even if the court says there wasn’t a contract, you still have to deal with quantum meruit and unjust enrichment. They’re slightly different, but basically they exist to prevent someone from getting something of value and not having to pay for it where a contract doesn’t exist or is thrown out.
Put another way, if you sell websites for $1,000 flat rate, and you list prices on your own site, a court is probably going to rule with you that your customer owes you $1,000.
Real Downfalls of Oral Contracts
More likely than not, you need to be concerned with unique contract terms. For example, if you and your customer agree to a $500 if you finish the website by Wednesday, you’re going to need some proof. This is where oral contracts suck.
Additionally, oral contracts lead to miscommunications. How many times have you made plans with someone and then find out there was a mixup or one of you forgot? That’s what we’re talking about here.
Getting Proof
As discussed earlier, courts look at all the circumstance of a contract. Even written contracts have that ability to clarify ambiguous terms. Having set prices and a regular standard of practice help with this. If you can demonstrate you operate the same way with every customer, a court will look favorably on that evidence.
Additionally, one of the best ways to enforce oral contracts is by memorializing them in email. Basically, after you’ve created an oral agreement, send your customer an email summarizing what you discussed. If they don’t object, this is as good of proof as you’ll need if they don’t pay.
Myths
You don’t need a handshake to make an oral contract valid. I’m not sure how this one got traction, but it needs to end.
“We didn’t have a contract. We just agreed to X.” Legally, that’s a contract.
Conclusion
All in all, I’m not recommending anyone rely on oral contracts. Written contracts are always better. However, I’m really hoping that you stop listening to people who know nothing about contract enforcement talk about the faults of oral contracts. They have them, but not what most people think.
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