Don’t Enter into Oral Contracts You Can’t Uphold
So I had a conversation the other day with an acquaintance about an “agreement” that she made with someone else to do some work.
Well, the acquaintance decided not to uphold her end of the bargain because of legal defenses to the agreement and suddenly found herself on the receiving end of a threat for a lawsuit so I was getting asked for advice.
My advice is twofold – don’t make agreements that you can’t or won’t keep AND stop making oral contracts.
After I shared that advice, I was told how there wasn’t a contract because nothing was written down. This is a common experience. Individuals make an oral agreement to do something or not do something and then change their mind and think that they don’t have to abide by their word because there is nothing in writing. That’s not how it works.
An oral contract is just as an enforceable as a written contract and an oral contract has a lot more risk to it. A contract is created when there are the following things present: offer, acceptance and consideration.
An offer is something like I will mow your lawn in exchange for you paying me $40.
Acceptance occurs when you say “I accept” or “ yes thank you” or anything qualifying as an equivalent. The consideration is the thing of value exchange which in my example is $40. That doesn’t have to be in writing to form the contract. It doesn’t have to have the date on which i will mow the lawn nor does it have to have the date which you will pay me. Those terms are implied and can be worked out.
While some contracts cannot be enforced based upon an oral agreement – the sale of land is one that requires that the contract be in writing – most oral agreements can be enforced.
Further, if my husband says Rachel will mow your lawn if you pay her $40 and you believe that my husband has the authority to make the agreement for me, that contract is enforceable as well.
The examples that I’m giving in this article are quite simple for illustrative purposes but my point is to inform you of how easily it is to make an oral contract without even realizing that you have done so. The statute of limitations on an oral contract is 3 years. You must instigate a lawsuit within 3 years of the alleged breach or you will be outside of the time to sue. Most likely no one is going to sue over an offer by me or my husband to mow the lawn of $40, however, it can easily happen.
In the example of my acquaintance, someone who appeared to have authority to act on her behalf made the offer for her to do some work in exchange for the other individual doing work for her. The acquaintance had no idea that this offer had been made or accepted causing her to become frustrated for the lack of payment for her work. Additionally, the other party was becoming frustrated because the acquaintance hadn’t done the trade work for them either. Thankfully, the two individuals eventually got together and figured out what happened and resolved the problem.
But that could have ended much differently with my acquaintance getting sued for a substantial sum of money because the other individual had completed a significant amount of work in anticipation of the trade. The individual who made the agreement appeared to have the authority to do so and would have likely been sued as well.
In Oklahoma, attorney’s fees are allowed as an element of damages in breach of contract lawsuits. This complicated agreement that I have laid out with the acquaintance should have been in writing to protect everyone but it wasn’t. The party who made the offer for my acquaintance still insists that no contract was made but the law says otherwise. Someone made an oral agreement that was highly enforceable.
Had the terms of this agreement been written down, my acquaintance should have been the party to sign the agreement but since the third party appeared to have authority to enter into the contract, it could have been signed by them. In a writing the attorneys’ fees issues could have been addressed as well as things like the value of the trade of the work, the time in which it needed to be done, and how payment would be made if the trade did not work out because either side received or required significantly less work than what was anticipated at the beginning. Because there was no written contract, if the parties hadn’t worked it out, this situation could have resulted in a costly lawsuit that took years to resolve.
The issues I have described are just a few of the reasons why an oral contract should be avoided. Additionally, they illustrate how easy it is to get terms confused for performance scope, time and payment. As you go forward in life and make agreements with people, I urge you to stop and think about how often you’re actually entering into verbal contracts and how a suit for the enforcement of those contracts could impact your daily life.
This article was originally published in the Yukon Progress on December 28, 2019.