Contracts put into place a legal agreement between two or more parties. They specify certain things the parties can or cannot do or purchase.
While most complex business transactions involve the creation of detailed written contracts, there are oral contracts, which are spoken rather than written. When one side violates an oral contract, the question that arises is whether or not a solely spoken agreement is enforceable.
California recognizes oral contracts
Verbal contracts are fully enforceable in most cases. The problem lies in proving their terms since any evidence relies fully on spoken testimony and eyewitnesses. Unlike written contracts, which have a statute of limitations of four years, oral contracts have a statute of limitations of two years within which parties can sue for breach of contract.
There are exceptions
Certain types of contracts must be in writing, or the state will not enforce them. For instance, real property contracts cannot be oral. Ones that specify terms to be carried out more than a year from the formation of the contract, including those meant for after a party’s decease, also need to be in some form of writing. Other examples include lease agreements exceeding one year in duration and loan and credit agreements greater in value than $100,000 that are not for family. Section 1624 of the state’s civil code lists contracts that cannot be solely verbal in nature.
California views oral contracts as legally binding in many situations, though proving the terms in a lawsuit may take longer than with written ones. Parties who believe the other party violated the terms of a legal agreement have the right to sue given the contract is not one of those required to be in writing.
