Oral contracts are valid.
Generally, the only contracts that MUST be in writing are:
- any promise to be responsible for someone else's debts;
- any promise consideration (like a ring) to marry (though this rule has been eliminated in many states);
- any promise that the parties cannot possibly fulfill within one year from when they made the promise;
- any promise involving the change of ownership of land or interests in land such as leases;
- any promise to pay a broker a commission for the sale of real estate;
- any promise for the sale of goods worth more than $500 or lease of goods worth more than $1,000 (the amounts may vary from state to state);
- any promise to bequeath property (give it after death);
- any promise to sell stocks and bonds (this provision is eliminated in some states).
The maxim that "oral contracts aren't worth the paper they are written on" is technically not true. It is an admonition regarding proof. It is a cute, easy to remember aphorism to convey several ideas. First, the process of writing and signing a contract forces everyone to be more specific about expectations, promises and definitions than an oral agreement. For example, the statement "I'll get that to you as soon as possible" is easy to accept verbally; but, in writing it seems vague and invites the parties to talk about what they mean: to me, it could mean tomorrow; to you, it could mean when you finish the projects you currently have going. Both are reasonable and valid definitions of " as soon as possible."
Second, the act of signing a document is a more serious and sacred act than shaking hands, or saying "okay." A signed document has a legal synonym of being an "executed" document. An unsigned draft is sent for execution. The alternate meanings of execute of "killing" and "putting to death" connotes the seriousness of an agreement much better than "signing". People often pause before signing; it is a last "do I really mean this?" Therefore, during the process of negotiating and writing, people are more thoughtful and specific knowing they will commit to the promises they are discussing.
Third, if disagreements do arise, a documented agreement eliminates precursor arguments over what the agreement actually was. Discussions move right to what the agreement meant, not what it was.
Most commerce occurs without documented agreements.
Think of your week. You probably signed no contracts; but, you entered into and fulfilled dozens: buying groceries, eating out, getting coffee, picking up supplies, filling your gas tank, sending mail, downloading songs, replacing the worn-out jeans, getting a down-payment for services to be rendered. These exchanges are all oral contracts.
How do contracts arise?
The law follows commercial norms. The law was built to yield outcomes businesses would have typically chosen. The law requires quite little actually; it requires a "meeting of the minds," indicia that the parties intended to agree—a price and a quantity; a quantity and a delivery date. The law fills in terms not specified; it presumes the parties intended "the usual terms" and looks to the parties' prior dealings, or what merchants in the industry generally say.
To have an enforceable contract, in writing, on-line or verbal, there must be an Offer, Acceptance of the offer, Consideration for the promises, Mutuality of commitment, a Legal purpose, product or service, and Capacity of parties.
An Offer is a proposal to create a binding agreement. The offer may have conditions to be met before it is binding. For example, displaying goods on your website along with words to the effect that "we have these for sale" is an offer. An offer may be revoked at any time before it is accepted, unless by its terms it is "firm," meaning open for a given period of time.
Acceptance is assent to the terms of the offer. Acceptance may be by actions or words. For example, if you offer to sell a book for $ 10, I accepted by handing you a $ 20 bill.
Consideration is what each party gets from the other. It is any promise, act or transfer of value that induces a party to enter a contract. You each give up something of value—time, money, effort, a promise, forbearance of an act you could otherwise do. For example, I promise to pay the charge on my credit card if you promise to send me your product. Consideration could also be forbearance—a promise to not do something that you have a legal right to do. For example, I won't go to the beach on Saturday if you give me your wrench.
Mutuality means that both parties give something up or do something; neither is doing what they would have done anyway. Also, if either party reserves an unqualified right to bail out, that person's promise is illusory: no promise at all.
Legal Act: You cannot make a contract for an illegal act; nor can you enforce a contract for an illegal act. So if you bet money the gallery will exhibit my work, and it doesn't, I can't sue to get you to pay.
Capacity of parties: Capacity is the ability to understand what is happening. The law presumes that minors and the mentally incompetent do not have the capacity to make a contract. Even if they sign a contract, you can't enforce it against them, although they can probably enforce it against you. And, minors can void a contract when the come of age. That is why parents sign for kids; and in the entertainment industry, a judge must approve a contract with a minor.
Contracts can now be signed electronically. Your signature is any mark you intend to be your signature. So, making your "X" is a valid execution of an agreement; even signing someone else's name is your signature (and forgery). Clicking "I agree" can create a contract. The contract may be formed by a series of correspondence, emails and conversations. You can see how these rules sometimes mean the parties made a contract they don't even know they did.
That is What the Fox on contract basics.
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