“Verbal agreements aren’t worth the paper they’re printed on.”
Small business owners and entrepreneurs often rely upon “handshake” or verbal agreements to conduct business. But are those agreements really enforceable? The answer is it depends.
Technically speaking, verbal agreements are enforceable in New York with certain exceptions as described by the Statute of Frauds. Practically speaking, it is very difficult to enforce such an agreement. For the purposes of this blog post, we are assuming that all of the requisite elements of a contract are present.
New York General Obligations Law § 5-701 (the “Statute of Frauds”) lists the types of agreements that must be in writing. Some examples are:
- the sale of an interest in real property,
- the sale of goods for $500 or more (under the U.C.C.),
- a contract that cannot be performed within one year,
- contracts of suretyship (a guarantee)
These types of contracts must be in writing or they are unenforceable (with some exception).
So How Do You Enforce a Verbal Agreement?
Verbal agreements by their nature lack clear written terms. Parties will often dispute what the terms of the agreement actually were. Faded memories and changes in circumstances can cause these disputes. Without some additional proof, a “he said…she said” argument is not likely to be successful.
The type of evidence you can use to enforce a verbal agreement is varied. You can use emails or text messages to demonstrate the agreed upon terms. Additionally, the parties’ actions in performing the terms of the agreement are very persuasive.
For example, suppose you enter into a verbal agreement with a builder to build a fancy new showroom for your business. The builder has until the end of the month to complete it. You and the builder shake hands, you let him into your building, and he proceeds to complete your showroom on time. You cannot then refuse to pay him because there was no written agreement.
The builder, under the terms of the oral agreement, has fully performed. Further, your actions in permitting the builder to fully perform his obligations under the agreement demonstrates the existence of an agreement.
Which Type of Agreement Offers the Best Protection?
Regardless of its technical legality, a verbal agreement is difficult (and expensive) to enforce. A written contract is always better at protecting the parties because it clearly and unalterably describes the parties’ intentions and obligations. While it will require some time and effort upfront, a written contract can help to avoid problems later.
Having an experienced contract attorney prepare your agreement is the best way to protect your interests. For more information, or to have your agreement drafted or reviewed, please contact our office for a free consultation.
Disclaimer: This blog is made available by Kloss, Stenger & LoTempio for educational purposes only. It is not intended to provide legal advice nor form any attorney client relationship between the reader and Kloss, Stenger & LoTempio. You should always seek professional advice from a licensed attorney for any legal questions you may have.