{4:50 minutes to read}
Clients often ask their attorneys whether an oral agreement – one that is not reduced to a writing, signed by the parties – can be enforced. This can come up when the client thinks that he is owed something by another party, such as payment of a sum of money or the performance of an act or duty; or, the client may want to know his own obligations when such a claim is made against him.
In a perfect world, oral contracts would be reduced to writing and signed by both parties, so that it is easy to see what the obligations and rights are of each party to the contract. In the real world, however, that often does not occur. When contracts are not reduced to writing, there are two issues that will always have to be addressed: enforceability and proof.
- Enforceability: Oral contracts are enforceable so long as they are not violative of the Statute of Frauds (in New York, General Obligations Law §5-701). Section (a) (1) of the statute provides, in substance, that agreements cannot be enforced if, by their terms, they cannot be performed within one year. In addition, Section (a) (2)-(10) describes certain other types of agreements, such as guarantees and others, which are also unenforceable if they are not in writing. The purpose of the Statute of Frauds is to prevent fraud and perjury.
For a written contract to be offered into evidence, it does not have to be a single, neat piece of paper or writing. Enforceable contracts can consist of different writings that, taken together, will form one contract if it is clearly intended that, together, they form a single agreement. Section 3 of the statute discusses different types of evidence that can be sufficient to demonstrate that a contract has been made.
There is a distinction between those contracts which, by their terms, cannot be performed within one year and those contracts, which would be subject to Section (a) (10) and those contracts which, by their terms, can be performed within a year, but might continue for a longer period of time. An example of the latter would be a performance based contract: if certain metrics are met, the contract would automatically extend for a second (or more) years; if the metrics are not met, the contract would terminate and not extend for additional years; therefore, the contract, by its terms can be performed within one year.
- Proof: It is obviously much more difficult to prove your case to a judge or jury if you do not have a written document to back up what you claim the terms of an agreement were.
Without a written contract or sufficient evidence to demonstrate that a contract has been made – and assuming the proffered agreement would not be subject to the statute, and therefore unenforceable as provided in Section (a) of the statute – parties would be have to resort to describing to the trier of fact what they believe the terms of the agreement are; and, if they are in disagreement, leaving it to the trier of fact – a judge or jury – to determine if there was an agreement between the parties, and its terms. Precisely the situation the party seeking to enforce the agreement does not want to be in.
Whenever possible, have any agreements that are of significance to you put in writing and signed by both parties. In the absence of that, it does not necessarily mean that you are out of luck, but it does mean that there are many more hurdles that may have to be climbed to have an agreement enforced.
