In a nutshell, not very often. The curiously-named Statute of Frauds, which was originally neither a statute nor had much of anything to do with fraud, states that Pasadena business litigation attorneys cannot enforce oral agreements regarding marriage covenants (including prenuptial agreements), sales of goods of over $500, surety (guarantee of obligations) agreements, sales of land, and contracts that cannot be performed within a year. The rules are rather complex. For example, the “sale of land” includes things like easements and mortgages. Furthermore, contracts of perpetual duration are usually not subject to the Statute of Frauds.
Even if they are technically enforceable, oral contracts are unreliable as a way to organize and structure important business or financial relationships. When there is only an oral agreement, disputes degenerate into a credibility contest. They do not address the true merits of the case. Since the plaintiff has the burden of proof, the plaintiff often suffers a loss in a case that could have been won.
Because of these prohibitions and roadblocks, many people think their spoken promises are not legally binding. As a result, some individuals make commitments that they have no intention of keeping. The law recognizes this, which is why oral contracts are enforceable in a number of situations.
What is a Contract?
Before a court can decide whether or not a contract is enforceable, it must first determine whether or not there was a contract in the first place. In California and most other states, a contract has four basic elements:
- Offer and Acceptance: Normally, this element is straightforward (e.g. “I’ll buy your dining room table for $100). But things can get murky. If I deliver a copy of my newsletter to your front door and you read it, did you just buy a lifetime subscription?
- Mutuality: Both parties must understand and agree that there is an enforceable contract with certain terms. If the dining room table “contract” is really a series of text messages, there may be no mutuality, especially if the messages contain different terms regarding things like payment or delivery.
- No Defense: This contract does not fall within the Statute of Frauds or is against public policy. Furthermore, assuming there is no fraud, duress, or theft involved, selling a dining room table is usually legal. Lack of capacity may be a defense, because minors cannot make contracts.
- Consideration: Each party must give up something of value. I give up my money and you give up your table. Consideration can also be something intangible, like your time or a legal right.
Enforcing Oral Agreements
There are two recognized exceptions to the Statute of Frauds. If both parties at least partially complied with the pact, or one party relied on the oral promise and suffered damage as a result of it being broken, a Pasadena business litigation attorney can enforce the oral agreement.
Third party witnesses may be the best way to establish oral contracts in court. Such a witness must normally testify that s/he saw the parties come to an agreement or heard them refer to their agreement. If I call a witness, your Pasadena business litigation attorney then has an opportunity to discredit that witness through cross-examination. In most cases, the jury ultimately decides whether or not a witness was telling the truth.
When a party to the agreement makes a statement, an exception to the hearsay rule makes that admissible. So even words spoke outside of the courtroom can have an impact on your case. . If a person makes a statement against his/her interests, such a statement can establish the existence of an oral contract. The hearsay rule, like most other business litigation rules, is extremely complex, so the advice of an experienced litigation attorney can help you find your way through the thicket of misunderstanding.
Despite popular myth, oral agreements are sometimes enforceable in court. However, these fights are difficult to win. For a free consultation with an experienced Pasadena business litigation attorney, contact the Law Office of Silvio Nardoni. We routinely handle matters in Los Angeles County and in nearby jurisdictions.