Can You Enforce a Verbal Business Agreement in Court?
A handshake, a spoken promise, a deal made over lunch—business moves fast, and sometimes formalities are skipped. But what happens when a verbal agreement is broken? Many business owners believe that without a written contract, they have no legal recourse. However, that is not always the case. When a dispute arises over a verbal arrangement, you might need legal assistance. If a business deal has gone sour, seeking guidance from a proven litigator is a smart first step.
William B. Hanley, Attorney at Law, provides seasoned legal representation in Irvine and Newport Beach, California, and across Orange, Los Angeles, and San Diego Counties. With over 40 years of dedicated experience as a civil trial attorney, Attorney Hanley is known for his direct, no-nonsense approach and for achieving significant results for his clients.
What Is a Verbal Agreement?
A verbal agreement is a contract in which the terms are agreed upon by spoken communication rather than in writing. From a legal standpoint, these agreements can be just as binding as written ones. The core components of any valid contract, whether written or verbal, are an offer, an acceptance of that offer, and consideration—meaning each party gives something of value.
For example, imagine a graphic designer offers to create a new logo for a local bakery for $1,000. The bakery owner agrees to the price and the project. In this scenario, an offer was made ("I will design your logo for $1,000"), it was accepted ("Okay, that sounds great"), and consideration exists (the logo design in exchange for payment). This simple exchange forms a verbal contract.
While these agreements are common for small, straightforward jobs, they become problematic when the terms are not clear or when one party's memory of the deal differs from the other's. This is where disputes often begin.
The Challenge of Proving a Verbal Agreement
The main difficulty with bringing a breach of contract claim to court is not its validity but proving its existence and the specific terms. With a written contract, the document itself serves as the primary evidence. For a spoken deal, you must rely on other forms of proof to support your claim. Courts need to see evidence that a deal was actually made. This can include:
Witness testimony: Were there other people present who heard the agreement being made? Colleagues, partners, or even neutral third parties can provide testimony about what they witnessed. Their credibility can significantly bolster a case.
Course of conduct: Have the parties started acting in a way that demonstrates a contract was in place? For instance, if the graphic designer in our earlier example delivered initial logo sketches and the bakery owner provided feedback, this behavior suggests they both believed they were operating under an agreement. Partial performance by either party is strong evidence.
Communications: Emails, text messages, or voicemails that refer to the agreement can be powerful evidence. A message saying, "Just confirming our conversation, I'm excited to start on the logo for $1,000," is almost as good as a formal contract. These records can substantiate the terms and show a meeting of the minds.
Financial records: Invoices, cancelled checks, or bank transfers that correspond to the agreement can prove that one party began to fulfill their end of the bargain. If the bakery paid a 50% deposit, it would be difficult for them to later claim no agreement ever existed.
Without this supporting evidence, a case can devolve into a "he said, she said" situation, which is very difficult for a judge or jury to decide.
California Law and Verbal Agreements
In California, verbal contracts are generally enforceable. However, the state’s laws, specifically the Statute of Frauds, require certain types of agreements to be in writing to be legally binding. This is to prevent fraudulent claims and misunderstandings in high-stakes situations. Some common business-related contracts that must be in writing in California include:
Agreements that cannot be performed within one year. If the terms of the deal make it impossible to complete within a year of its making, it must be written.
An agreement to pay the debt of another person. If you promise to cover someone else's loan or bill, you need to document it.
Leases of real property for more than one year. A one-year apartment lease can be verbal, but a two-year lease must be in writing.
Agreements for the sale of real property. Any contract involving the transfer of land or real estate must be in writing.
Contracts for the sale of goods priced at $500 or more. This is a key provision from the Uniform Commercial Code (UCC) that applies in California. A verbal agreement to buy a $600 office printer is typically not enforceable without written proof.
If your verbal agreement does not fall into one of these categories, it is likely enforceable in court, provided you can prove its terms. Understanding where your agreement stands under the Statute of Frauds is vital to building your case.
Steps to Take if Your Verbal Agreement is Breached
If you believe another party has broken a verbal promise, it is important to act methodically.
Gather evidence: Collect any emails, texts, bank statements, invoices, or notes related to the agreement. Write down your own detailed account of the conversations, including dates, locations, and any witnesses.
Contact the other party: Sometimes, a misunderstanding can be cleared up with a simple conversation. A formal letter or email outlining your understanding of the agreement and the breach can put the other party on notice and may prompt a resolution.
Consult with an attorney: If the other party is unresponsive or disputes the agreement, it is time to seek legal advice. An experienced business litigation attorney can assess the strength of your case, review the evidence you have gathered, and explain your options. They can help you understand the potential outcomes and the costs associated with pursuing a claim.
An attorney can also send a formal demand letter on your behalf. This official communication often shows the breaching party that you are serious and may encourage them to settle the matter without going to court.
Business Litigation Attorney Serving Irvine and Newport Beach, California
The desire to help those who have been wronged is the foundation of Attorney William B. Hanley's successful career as a litigator. As an experienced attorney with over four decades of practice, he is recognized as one of California's top civil trial attorneys. His record of accomplishments includes a landmark $50 million verdict and one of the largest punitive damage awards recorded.
Attorney Hanley takes a direct approach to client representation, believing in open, honest, and frequent communication regarding all important decisions affecting a case. If you need a skilled litigator who is committed to obtaining the best outcome for your case, call William B. Hanley, Attorney at Law. Serving Irvine and Newport Beach, California, as well as Orange County, Los Angeles County, and San Diego County.