Back in the day it was not uncommon for important business dealings to be sealed with a handshake. This usually followed a verbal agreement between two parties that was intended as an oral contract. Although the parties to these verbal agreements may have intended well, what happened when one side failed to meet its obligation? Did the handshake deal constitute a legally binding contract? Surprisingly, it is possible to create a binding contract through an oral promise. These types of deals are still fairly common today. However, modern law has implemented standards to determine whether such an agreement is enforceable in court.
It's a Question of Evidence
Any business law attorney will tell you that an oral contract is only as good as the evidence supporting it. At first glance, two parties engaging in a handshake might seem like pretty good evidence. However, it isn't necessarily so from a legal perspective. Although the handshake signifies a coming to agreement, it doesn't spell out the terms of the deal. Thus, it is important to examine the surrounding circumstances to locate evidence that would support the alleged agreement.
The old gentleman's agreement can be enforceable if certain requirements are met. First, there needs to be proof of the essential terms of the agreement. This includes important details such as the price and time for performance. Second, each party must give up something of value. In the legal world, this is known as "consideration." This might consist of the payment of money, or the exchange of a product. Finally, there needs to be proof that each party intended to be bound by the agreement. This can be determined from the surrounding circumstances such as an objective act that indicates a desire to create a contract.
A Legal Twist: The Statute of Frauds
Some types of oral contracts will not be upheld by a court. Certain types of contracts are required to be in writing under the age-old doctrine of the Statute of Frauds. Some of the areas that fall under the Statue of Frauds include:
- The sale of land.
- Contracts for more than one year.
- Contracts over a certain monetary threshold.
There are a few other situations which would require a writing as well. Whether an oral contract falls within this doctrine will depend on how it is interpreted in your jurisdiction. Business law varies from state to state.
The Last Word on Oral Contracts
Engaging in an oral contract can be tricky. It is preferable to memorialize your business dealings in a writing that can be referred to later on. This prevents any misunderstandings or retractions that could cause the agreement to end up in court. A business law attorney can help you create a written contract that will be legally binding. If you need assistance with a contract matter in Utah, contact T.R. Spencer Law Office in Sandy, Utah. An experienced lawyer will assist you in making your contract a success!