In New York, many people and business owners rely on verbal agreements for everyday or informal transactions. Verbal agreements can be legally binding, but for them to be considered binding agreements, certain specific circumstances and requirements must be met. Unlike written contracts, verbal agreements lack the clarity of documented terms which can lead to disputes due to miscommunication, memory loss, and lack of written documentation making it harder to enforce and prove in court.
In this blog, we’ll discuss the enforceability of verbal agreements in New York, the elements of a valid contract, when a written agreement is required and practical tips for verbal contracts—when working with an experienced contract attorney can help protect your interests.
Enforceability of Verbal Agreements
Verbal agreements can be legally binding but enforceability depends on specific factors and proof.
Proving Terms
One of the biggest problems with oral agreements is proving the terms. Unlike written contracts, verbal agreements lack a physical record which can lead to disputes over what was said. In court, this becomes a “he said, she said” situation where both parties’ accounts may conflict. Without additional evidence proving a verbal agreement’s terms can be tough and courts will require clear corroboration to enforce it.
Court Criteria
Courts will look at several types of evidence when determining the enforceability of a verbal agreement. Communication records such as emails, texts, or written summaries of discussions can support the existence and terms of a verbal contract and prove a contract existed. The actions of each party can also be evidence; for example, if one party performs as agreed it can imply a contract was in place. Courts will use these practical indicators to infer the intent and terms of the verbal agreement and enforceability.
Partial Performance
Partial performance is another factor that can be considered by a court in determining the enforceability of a verbal agreement. When one party has acted in reliance on the agreement—such as paying money, or delivering goods or services—the court may consider this as evidence of a contract. But partial performance must be substantial enough to show the parties intended to be bound by specific terms that support a contract even without written documentation.
Documentation
To make verbal and written agreements more enforceable it’s a good idea to have some form of documentation of the terms discussed. Following up with an email that outlines the agreement or saving communication exchanges can be valuable evidence if a dispute arises. Although a formal contract is the best way to go any documentation of an agreement can help uphold its terms.
When a Written Agreement is Required
The Statute of Frauds is a legal doctrine that requires certain contracts to be in writing to be valid. This is part of N.Y. U.C.C. Law § 2-201 and is designed to avoid misunderstandings and potential fraud by requiring documentation for agreements that have significant financial or legal implications. Where verbal agreements may lack clarity or proof the statute provides clear guidelines on when a written agreement is required.
Real Property Contracts
Contracts for the sale, transfer, or lease of real property are among those that must be in writing to be enforceable. Given the long-term implications and financial investment involved in property agreements a written contract is proof of the terms agreed upon. Without a written document any agreement involving real property is generally unenforceable in New York courts.
Agreements Not Performable Within One Year
Any contract that cannot be fully performed within one year from the date of the agreement must also be in writing under the Statute of Frauds. This provision prevents misunderstandings that can arise over time when verbal terms become hard to recall or prove. For example, a long-term service agreement or project timeline that goes beyond a year would need written confirmation to be legally binding.
Sales of Goods Over $500
Contracts for the sale of goods over $500 must be in writing. This provision is designed to protect both buyers and sellers and ensures that significant transactions have documented terms to reduce the risk of disputes over the nature, quality or delivery of the goods.
Contracts to Guarantee Another’s Debt
Agreements where one party agrees to assume responsibility for another’s debt, known as surety or guarantee contracts are also subject to the Statute of Frauds. These types of arrangements involve significant financial risk so written confirmation is necessary to protect the guarantor and clarify the extent of the obligation.
Exceptions to the Statute of Frauds
While the Statute of Frauds requires certain contracts to be in writing there are specific exceptions where oral contracts or verbal agreements can still be enforceable.
Admission Under Oath
If a party admits to a verbal agreement under oath in court the agreement can be enforceable even without a written contract. This exception is based on the admitting party’s acknowledgment of the terms of the contract and provides sufficient grounds for the court to recognize and enforce the agreement. Such an admission waives the Statute of Frauds.
Promissory Estoppel
Promissory estoppel applies when one party makes a clear and reasonable promise that the other party relies upon to their detriment. If breaking the promise would result in an unfair or unconscionable outcome the court may enforce the agreement to avoid significant harm. However promissory estoppel is used sparingly and requires the injured party to prove not only reliance on the promise but also substantial harm that goes beyond ordinary loss or inconvenience.
Partial Performance
Partial performance is another exception where verbal agreements can be enforced under the Statute of Frauds. If one party has performed a significant portion of their obligations under the agreement – such as making payments, delivering goods, or starting work – the court may find that the performance evidences a binding contract. However partial performance generally only applies to specific types of agreements such as real estate transactions and may not be sufficient for contracts that require long-term performance.
Merchant’s Exception
Under New York’s Uniform Commercial Code verbal agreements between merchants can be enforceable if one party sends a written confirmation of the agreement and the other party doesn’t object within 10 days. This exception is designed to facilitate commercial transactions where a formal written contract would delay business. The merchant’s exception highlights the importance of timely communication and response in upholding or contesting verbal agreements in business.
Tips to Protect Verbal Agreements
To minimize risks, certain practices can help protect the enforceability of verbal agreements.
Document the Details
After the verbal agreement is reached send a written summary via email or other documentation to make sure the verbal contract stands up in court. Outline the key terms including roles, obligations, timelines, and payment terms, and send to the other party for reference. This will be a useful reference point if the agreement is disputed and an informal but effective written acknowledgment of the terms.
Keep Communication Records
Save all related communications including emails, text messages, and notes from conversations. These records will show the intent and terms of the agreement and create a trail of evidence that can be used if a dispute arises. Consistent documentation of interactions will support each party’s understanding of their obligations.
Get a Witness
If possible have a third party witness the agreement, especially for verbal agreements involving significant financial or legal obligations. A witness can provide additional testimony to support the terms and existence of the agreement and make it more credible. Witnesses are particularly helpful in informal business agreements where documentation is limited.
Act Early and Document
If applicable start performing your side of the agreement and keep records of your performance such as receipts, invoices, or delivery confirmations. Performing part or all of your obligations will strengthen your position in court as it shows you are committed to the agreement. This can be especially helpful if the other party denies the verbal agreement ever existed.
Get a Lawyer for Big Agreements
For high-risk or complex agreements consider consulting a contract lawyer before relying on a verbal agreement. A lawyer can assess the risks and advise on how to mitigate them or draft a formal document. If a written contract is not possible a lawyer can make sure the necessary documentation and communication is in place.
Contact an Experienced Westchester Contract Drafting and Review Attorney Today!
If you’re facing questions about the enforceability of a verbal agreement or need guidance on protecting your contractual rights, reach out to our team at Rosenbaum & Taylor, P.C. We are here to help you navigate complex agreements and ensure your interests are fully protected.
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