Can You Sue for Breach of a Verbal Contract in California?

Key Issues:

In California, verbal contracts can be legally binding, but certain factors influence their enforceability:

1. Enforceability of Verbal Contracts: While many agreements can be oral, California’s Statute of Frauds requires specific contracts to be in writing to be enforceable. These include contracts involving real estate transactions, agreements that cannot be performed within a year, and certain financial arrangements. Nakaselaw Firm
2. Statute of Limitations: The timeframe to file a lawsuit for breach differs between written and verbal contracts. For written contracts, the statute of limitations is four years from the breach date, whereas for verbal contracts, it is two years. Self-Help Access
3. Challenges in Proving Verbal Contracts: Without written documentation, establishing the existence and specific terms of a verbal contract can be challenging. Evidence such as witness testimony, actions demonstrating agreement, or other corroborative materials may be necessary to support claims of a verbal contract’s existence and terms. UpCounsel

Given these complexities, it’s advisable to document agreements in writing to ensure clarity and enforceability.

Main Article

A contract is a legal agreement between two or more parties in which the parties agree to perform certain actions, refrain from specified actions, or make payments according to the terms of the deal negotiated. Most often when we think of a contract, we envision a highly detailed written document, which is what complex business transactions tend to require to ensure that all parties share the same understanding of their agreement. But California also recognizes, to a certain degree, the validity of verbal contracts—those whose terms are only spoken, not written down.

Before someone decides that it is safe to rely on a verbal contract, though, they should understand the limitations of such an agreement. California law treats verbal contracts differently than written contracts in key respects that can limit a person’s ability to legally enforce one. Resolving disputes over the terms of a verbal agreement can also be much more difficult than when there is a written document.

What Must a Contract Include in California?

To be legally binding and enforceable in California, a contract must include a mutual agreement, i.e. an offer and acceptance, and consideration. The parties agreeing to the contract must also have legal capacity to enter into an agreement, and the contract must be for a legal purpose. In other words, all parties to the contract must agree on the terms of the contract and to be bound by it. There has to be a clear offer by one party that is accepted by another, and something of value (consideration) has to be exchanged by those involved. The deal cannot be for an illegal purpose, and every party to the agreement has to understand what they are agreeing to. (Minors and those lacking mental capacity, for example, can’t legally agree to a contract.)

In many cases, California does not require a contract to be written down to be valid and legally enforceable, if it includes the basic elements above. Relying on a verbal contract can be a serious mistake if one does not understand the limits California law places on such agreements, however.

The Limitations of Verbal Contracts in California

The first serious limit that differentiates verbal from written contracts in California is the different statute of limitations for filing a lawsuit for breach of contract. While a party has four years from the date a written contract was broken to sue, they have only two years to sue if the contract was verbal.

California law also specifies that certain types of contracts must be in writing to be enforceable. Laid out in Civil Code § 1624, these include, but are not limited to the following:

• Agreements that will be performed more than a year after the contract is entered into.
• Lease agreements for periods of longer than a year.
• Agreements for the sale of real property.
• Agreements that won’t be performed during the promisor’s lifetime.
• A contract to lend money or grant credit of more than $100,000 not for personal, family, or household purposes.

While these limitations and exceptions are significant, they are not the most serious reason to insist that contracts should be in writing. The inescapable difficulty inherent in verbal contracts comes up when there is a dispute, because you only have the parties’ word to go on to determine the terms of the deal.

How Do You Prove the Terms of a Verbal Contract?

If a verbal contract becomes the subject of a lawsuit, the first problem is figuring out what the parties agreed to in the first place. Each may have a different account or understanding of what they believe they were bound to, and with no independent record of the agreement the court will have to gather spoken testimony and eyewitnesses to try to piece together the full picture. This can drag out a lawsuit and make it far more costly, as well as making the outcome less certain. Having the right to sue, provided that the verbal contract is one that is permitted by law and the case is filed within the shortened statute of limitations, is no guarantee that a claim will be successful, especially when the case comes down to weighing one party’s words against another’s.

Negotiating Strong Contracts in California

At Ghassemian Law Group, we understand the vital importance of comprehensive, individualized written contracts in protecting your business from liability and risk. Our business, construction, and real estate law experts negotiate and draft clear contracts that can save you from the expense and stress of future litigation. To schedule your consultation, contact us here today.