Broken Oral Agreements

“Our insurance agent told us that we were completely covered, but, when we filed a claim for losses, the insurance company told us that a significant part of our losses were not covered in the plan- That almost killed our business.”

Every day, oral contracts are made with no intention or even feeling that they need to be written down. This may happen in person or over the phone for services or products like utilities, car insurance, or deliveries. The parties orally have agreed to the terms. Or an insurance agent may have interpreted the written contract to say that everything is covered under the policy. That constitutes a contract that is just as binding as a written one.

Many state and federal laws exist to ensure enforcement of oral contracts. While all important contracts should be written, oral contracts are often a convenient and commonly used form of agreement between people or companies.

What is an oral agreement?

If problems or disagreements should arise, the main problem with an oral contract is that the case becomes one person's word against the other. Some states may have laws (called statutes of frauds) that regulate the type of property or amount of money an oral contract can involve. States also have a statute of limitation on any contract.

Janet, Jenner & Suggs has successfully handled many oral contract cases. To establish the validity of a case, we consider these questions:

Was there an offer and acceptance? A meeting of the minds?

Contracts are not valid until there is an offer and acceptance. A meeting of minds occurs when all parties agree to the material or important terms and conditions of the deal. Usually, this means that if major points such as price are not agreed upon, there is not a binding contract. On the other hand, if the major points are agreed upon, the need to work out minor details or specific contract language may not prevent a meeting of the minds.

Consideration

In any contract, each side must give the other something of value for the agreement to be binding. This could be an exchange of money such as a down payment or a mutual promise of some future benefit.

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When to seek legal advice

The essential problem with oral contracts is that they can be difficult to prove and enforce. The party who chooses not to honor its bargain will claim that no agreement was ever reached or insist that the agreed-upon terms were not as claimed. The case may be decided on whatever evidence is available - notes that were made at the time, witness recollections of what was said, emails, even plain common sense. This is why anything in writing, even doodle filled notepads and backs of envelopes, suddenly take on huge significance.