Business owners depend on contracts to keep their companies running smoothly. While most business agreements are on paper, some company owners believe in oral contracts — sometimes called verbal or handshake agreements. Are oral contracts enforceable in California, though?
Technically, yes, oral contracts are enforceable, but that doesn’t mean they are easy to enforce. The trouble with enforcement is the main problem with handshake agreements.
Difficult to prove their existence
An oral contract is what it sounds like — terms agreed upon verbally. There is usually no record of the contract; therefore, it can be extremely difficult to prove it exists or that certain terms were set. While proving the existence of an oral agreement can quickly turn into one person’s word against the other’s, there are a few ways you may be able to prove one exists if the other party is now claiming it does not. The following items, for example, make good supporting documentation:
As long as these documents support the terms agreed to, you may have the ability to enforce the contract. So, save everything. Failure to do so may only hurt you later.
Okay for simple but not complex contracts
A handshake agreement may only be worth it for simple, not complex contracts. Again, the more complex the terms, the more difficult they are to prove if the contract falls through for any reason.
If you want to pursue an oral contract…
If you want to pursue an oral contract, no matter how simple the contract terms, it is always wise to eventually put it in writing — the sooner, the better. Too many people are willing to back out of a verbal contract when it isn’t serving them well. By documenting the terms in writing, it makes the oral agreement legally binding and difficult for either party to back out without consequence. Putting business contracts in writing is always best.
Need help enforcing an oral agreement?
If you have an oral contract that has fallen through and you need assistance enforcing it, you are in luck. Help is available to you. As long as you have some sort of proof that the contract exists, you may be able to use legal remedies to recover your losses — such as private negotiation, mediation, arbitration or, if absolutely necessary, litigation. After a careful case review, legal counsel can go over your options and help you decide the best way to proceed.