The dreaded oral contract. Before you ask "can I enforce my oral contract" you really need to ask, "should I make an oral contract". The answer to the second question is no, you should not enter into an oral contract. All your contracts should be in writing. The answer to the first question depends on other facts particular to your agreement, as some contracts have to be in writing to be enforceable. I talk about that in more detail below.
What is the Statute of Frauds?
The statue of frauds is a statute that requires an agreement to be in writing to be enforceable. See the below examples.
What Types of Contracts Cannot Be Oral?
Every state has some version of the Uniform Commerical Code ("UCC"), which is the law regarding the enforcement of contracts for the sale of goods. In North Carolina, the UCC starts under North Carolina General Statute 25-2-101. NCGS 25-2-201 states that most contracts for the sale of goods for the price of $500 or more has to be in writing to be enforceable. There are exceptions to this requirement though and they are:
- When payment or delivery of the goods has been made or accepted; or, if the party against whom enforcement is sought admits in court that a contract was made (basically there is no longer a dispute as to whether or not an agreement was made as there is Court record of it or the transaction has been completed);
- When the goods are specially manufactured goods
Contracts for the purchase and/or transfer of Real Property must be in writing (why would you not want it in writing anyways?) to be enforceable. NCGS 22-2 expands the writing requirement as follows: "[a]ll contracts to sell or convey any lands ... and all other leases and contracts for leasing land exceeding in duration three years from the making thereof, shall be void unless said contract, or some memorandum or note thereof, be put in writing and signed by the party to be charged therewith, or by some other person by him thereto lawfully authorized.
The UCC and Real Property written agreement requirements above are part of the aforementioned statute of frauds, but there are other types of contracts, discussed below, that are unenforceable without a written agreement and also fall under the statue of frauds, specifically 22-1 of the NCGS.
- An agreement that, by its terms, cannot be performed within one year (think employment contracts, some high dollar construction contracts, etc.);
- An agreement to pay the debt of another, sometimes called a "guaranty" (more on that here);
- An agreement by a debtor to pay a debt which has been discharged by bankruptcy; and,
- Commercial loan commitments by a bank, savings and loan association, or credit union for loans in excess of $50,000.
My Agreement is Not Subject to the Statute of Frauds, so I'm Good Not Putting Other Agreements in Writing, Right?
First off, that's a terrible idea. Reason being is that people's memories change when it's convenient for them. If you have an agreement that is not subject to the Statute of Frauds I would encourage you to get it in writing regardless.
However, if you are in a position where an oral agreement would not violate the statute of frauds, thereby making it enforceable, I would say it's a good idea to memorialize the oral agreement in writing as soon as possible and have both parties sign the acknowledgment.
*THIS BLOG POST DOES NOT ESTABLISH AN ATTORNEY CLIENT RELATIONSHIP AND SHOULD NOT BE CONSTRUED AS LEGAL ADVICE.