Oral Agreements – You’re Just Asking for Trouble

Samuel Goldwyn

As concerns oral agreements, the statement that “a verbal [sic] contract isn’t worth the paper it’s written on” erroneously attributed to Samuel Goldwyn actually is pretty close to the mark.

Sometimes I am asked whether oral agreements (as contrasted to those that are written) are enforceable. This post will answer that question but will explain why, even when oral agreements are enforceable, they should be put in written form, anyway.

Oral Agreements Generally Enforceable

Generally, oral agreements are enforceable in California. There are, though, many exceptions. For example, agreements for the sale of land or any agreements to the extent that they will require performance after one year must be in writing (Civil Code Section 1624), as must premarital agreements (“prenups”) (Family Code Section 1611). Also, written agreements generally may be amended only in writing and not orally (Civil Code Section1698).

There are exceptions to the exceptions, however. For example, if both parties perform their obligations under an oral agreement that, according to statute, must be in writing, then a court will enforce the agreement even if it is only in oral form. This situation might occur if, both parties having performed, one party believes that the other’s performance was inadequate.

Reasons to Avoid Oral Agreements

There are both business and legal reasons to avoid oral agreements, even when they are enforceable:

• Without a written agreement to refer to, it is too easy for the parties to have different understandings of the deal terms, possibly setting the stage for a dispute down the road.
• If a dispute results in a lawsuit, then the already-high costs of litigation will be increased if the parties have to pay their attorneys to battle over what an oral agreement really said.

Whenever negotiations with another party reach the point where there is agreement on essential business terms, that’s the time to say “Oral agreements lead to problems – let’s put this agreement in writing as soon as possible.”

Photo credit: Wikipedia

Dana H. Shultz, Attorney at Law  +1 510 547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.