Oral Contracts vs. Written: Get It in Writing

It’s always a good idea to be careful about what you say, but especially when agreeing to a transaction. Because, in Washington and elsewhere, oral contracts can be every bit as binding as written ones.

The key factor is evidence. Without a witness’s testimony, a recording, or some other indication of the agreement’s terms, no judge can enforce your oral contract.

In the United States, any contract, written or oral, must have three components to be considered legally binding: offer, acceptance, and consideration (legal value). That’s pretty simple, which is another reason to take care. An estimate or quote, if accepted and agreed upon, can constitute a contract.

Because evidence can be difficult to produce if someone breaks an oral contract — and also because people don’t always remember a conversation the same way — it’s wise to put agreements in writing. That way, all parties will literally and figuratively be “on the same page,” and misunderstandings are less likely. Having an attorney review the contract before you sign is always a good idea, too.

Your document doesn’t have to be complicated. In fact, many contracts are unnecessarily wordy and difficult to comprehend. One of our cases involved a simple, handwritten note on a page from a small legal pad, saying, in effect, “I agree to sell so-and-so for this much.” In court, the parties wrangled over whether the note constituted a legal contract. The judge ruled “yes.”

Written contracts can seem intimidating, but in fact they protect all the parties in an agreement by setting down the rules, allowing for contingencies, and spelling out the terms to avoid misunderstandings.

How to modify your contract

What about modifcations? The law applies equally to oral and written contracts: they can change, but only if the consideration — the amount of legal value— is paid by both parties for the change.

If I hire you to wash my car for a set price, then we can add a motorcycle to the agreement if I agree to increase your pay. Otherwise, even if you have agreed to wash the motorcycle, too, I can’t sue you for failing to do so, not if you washed the car. In the eyes of the law, in washing the car for our original, agreed-on fee, you have satisfied the terms of our contract. However, if I’ve increased your pay to include motorcycle washing but you only wash the car, then you may be in breach of our contract.

How long do I have to file my lawsuit? If we have an oral contract, you have three years to enforce the terms (if you can prove them) of the agreement. Written contracts, however, have a six-year statute of limitations. That’s another good reason to write it down: the longer time period provides additional protection against breaches.

Clients of mine once made a handshake agreement to go into business. Five years later, they were in dispute. But neither party could sue, because the statute of limitations had passed. The clock had started ticking the instant they shook hands.

Not all contracts are enforceable, written or oral. If you hire someone to kill another person, or to break another law, you cannot sue them for breach of contract, because your agreement violates public policy.

You May Be Able to Back Out

And, in Washington, some types of contracts allow the signers to change their minds within a certain period of time. Our state’s “Lemon Laws,” for instance, allow buyers of new (not used) vehicles to sue in the event of “substantial, ongoing problems with warranty repairs. “

But some other types of contracts can be cancelled with few or no repercussions. Going into business? Some business opportunity contracts can be canceled within seven business days after signing. Joining a health club? You have three business days after signing the contract to renege and receive a full or partial refund of your fees. To see which contracts may be cancelled and under what terms, go to http://www.atg.wa.gov/consumerissues/cancellationrights.aspx#.Uq9Fw5ExjEU.

Contracts can be tricky to negotiate and troublesome to enforce. To protect yourself, make sure to put any and all agreements in writing. And hire a lawyer to inspect the agreement, no matter how simple, to make sure everyone is protected against disappointment or even harm. Because, in every negotiation, it pays to have someone with knowledge and expertise on your side. Call us today at (509) 927-3840.