But It's Not In Writing! Don't Quarrel Over Your Verbal Contract

Are you considering, or have already entered into an agreement? Have you formalized your agreement into a written contract? If the agreement is verbal, are either of you legally obligated to perform? GLO specializes in distilling agreements into enforceable written contracts, and on advising clients on the enforceability of their verbal agreements.

I do not have a written contract. Is my verbal agreement enforceable?

There is an old saying that “a verbal contract isn’t worth the paper it’s written on.” It’s a humorous phrase emphasizing the lack of value and reliability in a verbal agreement. However, as a general rule of Colorado law, a verbal agreement is just as enforceable as a written contract. Though there are exceptions to this rule, the important consideration is that it is harder to prove verbal agreements. Therefore, you should attempt to reduce all verbal agreements into signed writings, but you probably don’t have to worry if you occasionally forget. For instance, employers, employees, and independent contractors may find it helpful to document the terms of their agreements in an Employment Contract or Service Agreement.

If there was an offer and acceptance, with supporting consideration (meaning the parties exchanged something of value, e.g., one side gets money and the other receives a product), then it is likely that your verbal agreement is enforceable so long as other elements are met. Because you can accept most offers by words or conduct, as long as the words or conduct objectively express the intent to accept the terms of the offer, it follows that they would be enforceable even if the verbal agreement was not reduced to writing. That being said, Colorado, like most states, requires certain types of contracts be in writing for them to be legally enforceable.

What are the elements of a valid contract?

Depending on where you look, you might see a different number of elements to establish a valid contract. We just touched on two, but there are potentially four others.

1. Offer and Acceptance. This is commonly known as a “meeting of the minds” because both parties agree to these terms.

2. Consideration. The parties must exchange something of value (monetary or otherwise).

3. Lawful Purpose. You cannot contract for unlawful, i.e., illegal, services or goods.

4. Certainty and Completeness of Terms. The terms of the contract cannot be vague, incomplete, or misrepresented.

5. Free Consent. The parties, both being of sound mind, should consent to the terms of the agreement freely, meaning without undue influence, coercion, duress, or misrepresentation of facts.

6. Capacity. The parties must have the capacity to enter the contract, meaning they are above the age of majority and are of sound mind.

What types of agreements have to be written and why?

Colorado’s Statute of Frauds, C.R.S. 38-10-112 provides some instances in which agreements must be in writing to be enforceable:

1.  Every agreement that, by its terms, cannot be performed within one year of its making,

2. Every special promise to answer for the debt, default, or miscarriage of another person,

3. Every agreement, promise, or undertaking made upon consideration of marriage, except mutual promises to marry,

4. Every contract for the leasing for a longer period than one year or for the sale of any lands or any interest in lands,

5. An agreement for the sale of goods for $500 or more unless specially manufactured goods or when payment was already received,

6. Credit agreements greater than $25,000, and

7. Contracts to lease goods over $1,000.

Colorado law requires that these contracts be written down in order for the courts to enforce them. There are a few exceptions, however, that allow for a contract, or parts of a contract, to be enforced even when they were verbal.

The reason that Colorado requires that these contracts be written down is to make parties more cautious about their agreements. If both parties write down their agreements, there is less of a chance for confusion and ambiguity in the future. Writing things down also helps provide clarity of the overall purpose of the contract. Also, if there is a written contract, it becomes much simpler for courts to understand what was agreed to and keeps either party from lying about what was or was not included in the agreement.

My agreement should be in writing, but it is not. What now?

It is possible that a court could enforce the terms of an agreement which should have been in writing but is not. Keep in mind that while these claims can be brought, they are not guaranteed to be successful.

1. Partial Performance

If part of the verbal agreement has already been performed, courts can rule that the entire contract is enforceable. In order for partial performance to apply to your verbal agreement, the partial performance must be: (1) substantial, (2) required by the verbal agreement, and (3) alleged, reasonably, to have been contained within the verbal agreement.

For example, many sales contracts require the buyer to apply for a loan shortly after the contract is made. It could be sufficient to constitute part performance if a buyer, relying on the verbal acceptance of the seller, applied for the required loan. This may allow the buyer to enforce the terms of the contract.

2. Promissory Estoppel

Promissory estoppel is the legal principle that a promise is enforceable by law when a promisor has made a promise to a promisee who then relies on that promise to their subsequent detriment. The reliance must have been reasonable. For example, an employer makes a verbal promise to an employee to pay the employee a specified monthly or annual amount of money throughout the full duration of the employee’s retirement. If the employee then subsequently retires based on a reliance on the employer’s promise, the employer could be legally required to uphold their promise to make the specified retirement payments.

Promissory estoppel is a legal way of enforcing the basic principle that one who makes promises must be required to keep that promise. It allows the courts to prevent parties from defeating claims simply by saying that the contract was not in writing.

3. Unjust Enrichment

Unjust enrichment is applicable when one party has performed the contract to the benefit of the other party without receiving their own benefit or to their own detriment. Unjust enrichment has three parts. First, the plaintiff must have provided the defendant with something of value and expected compensation in return. Second, the defendant must have acknowledged, accepted, and benefitted from what the plaintiff provided. Finally, the plaintiff must show it would be unjust for the defendant to enjoy the benefit of the plaintiff’s actions without the plaintiff having received any benefit. For a court to determine this, it requires a close look at the specific facts of each case.

What if my agreement was in writing, but some of the terms were changed verbally?

So long as your agreement isn’t required to be in writing in the first place, you may modify it by a verbal agreement. This is true even when the contract has an explicit provision stating that no verbal agreements can be made. If an offer to amend a term was made, accepted, and had consideration, the amendment will be binding if the contract does not fall under one of the eight contracts that must be in writing.

If the contract is one of the eight types that must be in writing, then the verbal amendment is binding only if it does not pertain to a material part of the contract. Some common reasons that contracts get modified include:

• Extending the contract

• Modifying the duration

• Altering quantity of items/goods

• Changing terms such as payment, delivery, or receipt of the product

Determining whether or not these changes are material depends on the particular contract. If big changes need to be made to the contract, it is best to write these changes down for them to be enforced. Also, before signing a contract, looking through the terms and making sure they are what you want to agree to can be a simple way to make matters easier in the future.

How can GLO help?

If you’re entering into an agreement, GLO can help you draft your verbal or written contracts. If you have already entered into a verbal agreement, GLO can help reduce your agreement to  a written contract.

If you are worried about enforcing a verbal agreement or the process for reducing an agrement to clear, enforceable terms, GLO offers one hour consultations to review documents and discuss legal issues.

Please fill out an Intake Form to inquire about working with GLO.

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GLO has prepared this blog to provide general information on legal issues that may be of interest. This blog does not provide legal advice for any specific situation and this does not create an attorney-client relationship between any reader and GLO or its attorneys. GLO engages clients only through specific signed fee agreements. GLO does not guarantee any results.