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. TOP
What
constitutes 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. TOP
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.
CASE
OVERVIEW: Breach of Contract Heritage Propane
Partners, based in Tulsa, OK, sued SCANA, South Carolina’s largest utility
company in 2003, in a contract dispute arising over the bidding process and ultimate
sale of SCANA’s propane businesses. Heritage,
now known as Energy Transfer Partners, was approached by SCANA through a SCANA
subsidiary, Cornerstone Ventures, about purchasing five of SCANA’s propane
companies. As part of the solicitation, Heritage and Cornerstone signed a confidentiality
agreement that all information connected with the bid process was to be kept confidential.
After a lengthy and expensive process – Heritage told Cornerstone it wished
to buy the companies and offered an initial bid. After further negotiations, the
two sides came to agreement on all outstanding issues and shook hands. The SCANA
senior management team told Heritage, “We have a deal.” The two sides
continued to work on finalizing the written documents, agreeing that Heritage
would meet with propane employees prior to announcing the agreement publicly.
However, SCANA kept delaying the final contract. It turned out that Heritage had
been used only as a “stalking horse” to garner a higher bid from another
buyer. All the time, expense and expertise that Heritage had expended had only
been used to facilitate transactions with a second bidder, enriching the bidder
and SCANA at Heritage’s expense. Breach of
contract, fraud, and punitive damages awarded--$48 MILLION TOP | 
