Contract Elements


Oral Contracts - Your Word IS Your Bond

Everyone is pretty familiar with the term "contract". Ask anyone and you will generally be told that a contract is a written agreement that says what each party will do, how they will do it, and when they will do it. It basically lays out the framework for a business relationship of one sort or another.

Contracts don't just cover business to business relationships either. In fact, the majority of contracts are developed between businesses and their customers.


The Invisible Contract

Chances are that you either formed a contract today or acted underneath one. If you went to the supermarket and bought something, you formed a contract. Chances are that you either signed a check or a credit card charge slip and either one constitutes forming an agreement to pay for the food you purchased.

Even if you paid cash, you formed an agreement with the merchant whereby the merchant promised that the goods you bought adhered to a stated or commonly recognized value. In other words, the merchant is promising that the ribeye steak you purchased is indeed a ribeye steak and it is not tainted.

Even if you never left the house today but did turn on a light, you operated under contracts with your electric company and your mortgage lender or landlord.


Oral Contracts

Written contracts are usually obvious. What aren't as obvious are the contracts that we form when we speak with each other.

If you agree to do something, sell something, or buy something and someone else acts on your statement, you may have formed an enforceable contract. Things can get a bit tricky though since rules vary about what contracts can be formed verbally.


If someone does act on your statement, a contract has still not been formed if:

1. You have agreed to do something that is illegal. You cannot enforce a contract to do something that is a violation of any local, state, or federal law.
2. If the terms of the agreement were not specified. If an amount or a specific action was not indicated, you don't have a contract.
3. If one or both parties were mistaken about a fundamental part of the agreement (ex. I agreed to purchase your stereo but I thought we were talking about the big one and you thought we were talking about the small one)
4. The subject or terms of the agreement are prohibited under the law. (examples: real estate contracts must be in writing and credit card companies cannot charge 50% annual interest)


Oral Contracts in Court

Oral contracts are by definition, contracts that are verbal, not written. Therefore, the terms or even existence of these contracts are often somewhat harder to prove in court. If you were to decide to sue the other party for breach of an oral contract, you would be required to show that the oral contract exists. This may or may not be possible.

Assuming that the other party disagrees about the existence of or the terms of your oral contract, you must be able to prove your case by "a preponderance of the evidence". In other words, the majority of the evidence must exist on your side.

Witnesses are always helpful, especially if they are not otherwise associated with you. If someone that you don't know witnessed the agreement and understands what the agreement was all about, that can be pretty potent evidence.

If the person knows you or has something to gain, that person's testimony will be more suspect and the judge will probably want to see other evidence to corroborate (reinforce) that testimony.

Actions can serve as corroborating evidence. If you wrote a check to serve as a deposit or down-payment, that would be pretty incontrovertible evidence that you intended to form a contract, even if you were to put a stop-payment on it later.

When suing under an oral contract, the most critical factor is your integrity in the courtroom. The natural tendency is for most people to try to minimize or even lie about something that they may have done wrong.

But if you do lie and you get caught, there is probably very little else that will help you. This is especially true if you are the plaintiff and the other person comes across as being honest.

Other factors may also corroborate the terms or existence of an oral contract. Your level of organization, your demeanor (attitude), your ability to provide documents that would corroborate your testimony are often the proof that is necessary to win an oral contract dispute.


Your Best Case

Remember, if you are suing under an oral agreement, the other party has already won unless you can prove your case. You must first prove that there was a contract, what the terms were, that both parties understood the contractual relationship, and that the other party violated or breached the contract. It's the old 'guilty till proven innocent' adage that rules the day and these tips will help you present your best case:

1. Get organized. Know how you will present your case, what your evidence is, and hopefully know what the other party will be claiming so that you can counter it.
2. Collect all of your documentation. The judge will want to see it. This includes pictures, checks, letters, receipts, and all other pertinent materials.
3. Show original documents if possible. Since copies can easily by changed, the original document will help eliminate questions and doubts.
4. Provide witnesses if possible. Be sure to talk to each about being honest and controlling their temper and language.
5. Control your anger no matter what the other person says. Don't interrupt the judge or the other party. You want to be seen as cooperative. Let the other person annoy the judge.
6. Never lie to the judge, even if you have done something wrong. It may come back to get you later. Even if the other party cannot prove that you lied about your action, the judge may be able to see through it.
7. Present only the facts and stay on the subject. The judge cannot rule based on information that doesn't pertain to the case at hand. The other party may have been convicted of assault but if it wasn't against you or doesn't pertain to your suit, forget about it.
8. If you make a statement, be prepared to support it and provide as much evidence as possible.
9. Visual evidence is usually the best followed closely by or supported by reports from esteemed professionals or public servants such as doctors, a CPA, or public service employees such as a police officer.
10. Practice giving complete and articulate answers based on fact, not emotion. The judge cannot rule based on how you feel about something unless you are claiming emotional damages.
11. Be nice!


When reasonable, it is best to obtain legal representation from a qualified and experienced attorney. You must however, balance the costs against the potential loss. It's not reasonable to spend a thousand dollars to be represented in a case where a few hundred are at stake.

Be sure to consider the long term costs as well however. A claim may only cost you a few hundred dollars in cash but cost you in your reputation and future business dealings.


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