A Gentleman’s Agreement

“A verbal agreement isn’t worth the paper it’s written on.”
attributed to Samuel Goldwyn

Do you find yourself going a bit too fast? With emails or phone calls back and forth, many people don’t always get details about their business deals in writing. If this sounds familiar, take a minute to think about what happens on the back side and who is responsible for protecting your interests.

You may hear that an oral agreement is just as valid as a written agreement. The law does not distinguish between an oral agreement and a written contract, technically, both are legally enforceable.

If there is a dispute about what was agreed upon, the Court will use a written contract to interpret the meaning before it will consider the oral agreement. This is because with oral contracts, even honest people tend to forget or misrepresent the facts as memories fade over time. Written contracts protect you by preventing misunderstanding; all of the information relating to your agreement is in one place; the agreed upon terms are specific; and it will usually keep you out of court.

How would you prove a valid contract exists if you rely on goodwill and mutual trust to do business?

If, for example, you make a change order based on goodwill, you will need evidence to support your understanding of the agreement. Courts will look to the communications between the parties, their actions, and the circumstances surrounding those communications. When making an oral contract, it can be difficult to prove what you have agreed to without a clear written record. Keep any and all documentation regarding the agreement, including notes, emails or written correspondence, even hand written sticky notes become important when trying to prove the existence of an oral contract.

What’s your excuse?

In my experience, clients rationalize their decision:

• I am too busy to put it in writing. A legal dispute to enforce an oral contract will take a lot more time and cost more money than drafting a written contract.
• I trust the other party. Even the most well-intentioned people don’t have perfect memories. Oral contracts expose you to the risk that there was a misunderstanding leading to a lot of he said, she said objectivity. Make it easy on yourself and write up an agreement.
• The transaction is just too complicated to write it down. Written contracts are not simple to draft. Odds are, you and the other party will be more likely to discuss and come up with comprehensive terms and conditions, than if you just have a verbal agreement. Take time to write out the deal and hash out any unclear points with the other party. If you can’t understand the transaction, how would a judge or jury understand it?
• I don’t want to offend the other party. You might think a request to enter a written contract can imply that one person distrusts the other and can jeopardize the working relationship. Honest and trustworthy people will not mind putting what they promise into writing.

Sure, oral contracts are easier to deal with than written ones, but if the deal goes south, you may be endlessly chasing the truth. And if the terms and conditions about your contractual obligations become especially complicated, you may want to hire a lawyer to help draw up the contract. From a lawyer’s view on contracts—you can avoid most legal battles by following Samuel Goldwyn’s wisdom—put the agreement on paper.