Once upon a time, not so long ago, businessmen often closed transactions with a simple handshake and the unspoken understanding that any promises made in the context of the deal would be kept as a matter of principle. In other words, a man’s word was his bond, and in many cases, this meant there was no need for a written agreement.
Conversely, in today’s litigious society, business lawyers usually discourage their clients from relying on this type of arrangement. As the Florida Bar Association notes, “Written contracts are almost always preferable to oral contracts, because a written document helps eliminate disputes about the terms and conditions of the agreement.” Furthermore, as the Florida Bar points out, lack of written information makes oral or verbal contracts more difficult to enforce in court.
But that doesn’t mean verbal contracts aren’t enforceable in Florida courts. Here’s what you should know before entering into this type of agreement.
To begin with, a contract is legally defined is any agreement in which an offer is made and accepted in exchange for a “valuable service or good.” For example, let’s say John is moving from New York City to Fort Lauderdale and contacts Mike’s Moving about its relocation services. Mike’s Moving says it can transport all of John’s furniture and household goods from his New York City apartment to his new home in Florida for a specific fee on a specified date. John agrees and completes and signs the required paperwork (agreement) in person or online. As soon as an authorized representative from Mike’s Moving reviews and signs the paperwork, both parties have entered into a written contract.
On the other hand, a verbal or oral contract is generally defined as a spoken rather than written agreement. This means that the participants in the example detailed above would enter into a verbal or oral contract if they made the arrangement over the phone, or even in person, but didn’t document the conversation in writing.
Now suppose something happens that causes a dispute between John and Mike’s Moving, causing his furniture to arrive a few days late to his new Fort Lauderdale home. Or perhaps some furniture is damaged during transport and John refuses to pay Mike’s Moving for its services. However, Mike’s Moving had specified that it wouldn’t be responsible for any damage and now wants to sue to recover payment for services rendered.
How can Mike’s Moving prove that it is a party to a legally binding verbal contract with John? To do so in a Florida court, Mike’s Moving must present enough evidence to demonstrate that: 1) the agreement existed; and 2) that both parties knew they had engaged in a legally binding agreement. One way the company could accomplish this would be to present testimony of a credible person who witnessed the conversation.
Having said all of that, you should also be aware that any contract made orally or in writing is invalid – and therefore unenforceable, if it involves illegal activity or is made for illegal purposes. You should also be aware that certain contracts must be made in writing to be legally binding. These include:
- Contracts that cannot be performed in less than one year
- Real estate contracts including but not limited to any sales or interest in real property
- Contracts pertaining to residential renovations, health care or credit agreements
- Contracts where one party pledges to pay off someone else’s debt
In this day and age, it is important that you fully understand the legal implications of engaging in a verbal or oral contract. To learn more about this type of arrangement and its potential effects on your business, contact the South Florida’s knowledgeable and experienced business attorneys at Eskander Loshak LLP today.