Contracts govern almost every aspect of life in a society. They exist in ways you may not even realize. From accepting website cookies to haggling over prices at a garage sale, agreements are a fundamental part of modern life.

A contract is simply a legally binding agreement between parties with the capacity to agree to specific terms in exchange for something. You are basically promising to do or give someone something in exchange for a benefit. If a breach of contract occurs, then you will have legal rights in court.

This article examines what components make an enforceable contract as well as why written agreements are better than verbal contracts. Information like this can help understand what you’re agreeing to and help you protect your rights.

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What Makes a Contract?

A binding agreement has to contain certain elements. These include:

  • Offer and acceptance – A valid contract requires an agreement between two or more parties or legally recognized organizations. The law requires the person making the agreement to be over 18 years old and mentally competent.
  • Consideration – The involved parties must exchange something of value (this is known as consideration). Without an exchange of consideration, there is no agreement.
  • Free consent and lawful purpose – A binding agreement must be for a lawful purpose with the free consent of the involved parties. You can’t legally enforce an agreement for something illegal.
  • Certainty and completeness – The terms must be certain and complete. That means the parties have to express their terms in a way that even an outsider can fully understand.

Even if all of the above elements are present, an agreement may be found to be void in court if it was made in situations of duress, undue influence, unconscionable dealings, or criminal activity.

Is a Verbal Agreement a Legal Contract?

With some specific exceptions, verbal agreements are considered a type of contract. However, all the components that make up a legally binding agreement must be present. If any of them is missing, then an oral contract may not be legally enforceable.

Can a Verbal Agreement Override a Written Contract?

The short answer is no. An agreement in writing is almost always easier to enforce than an oral one. Verbal agreements can be very hard to prove; unless you recorded the agreement, it can be hard to prove the agreed terms in court. The involved parties may also have different recollections of the terms after a period of time.

Why Written Agreements Are Better 

A written contract lays out the terms of the agreement and limits one party’s ability to change the terms after the fact. U.S. contract law has a provision called the “Four Corners Doctrine,” which governs written agreements and outlines why they are better than oral agreements.

The “four corners” refers to the four edges of a document. The legal parts of the agreement exists inside those edges. The four corners rule states that two or more parties that enter into a binding agreement can’t use verbal or implied agreements in court to contradict the agreed terms.

Evidence that exists outside these corners can’t be used in court, especially if it directly contradicts the terms of the agreement. Otherwise, courts would be filled with people trying to retroactively renegotiate terms outside what they originally signed.

Written agreements also protect all involved parties from misunderstandings that could happen during negotiations. You are still bound by the terms even if you sign an agreement without reading it first. All that matters is the agreement meets all of the elements of a valid contract.

When Written Agreements Are Necessary

Some types of agreements must be in writing to be legally binding. The Statute of Frauds requires six types of agreements to be made in writing. These are:

  • Sale or transfer of real estate or land – Transactions involving transferring real estate leases require a signed deed. A deed is a type of written agreement that is enforceable under the statute.
  • Sale of goods worth more than $500 – Selling a car, flat-screen TV, or other item worth more than $500 requires a written receipt or some other written record. This proves money really switched hands.
  • Paying off an estate’s debt using personal funds – An estate executor who wants to prevent a house from going into foreclosure using their own money must sign a written contract outlining the terms.
  • Taking on the debt of another party – If you promise a creditor that you will pay another person’s debt, then you must make that promise in writing. A contract of surety is subject to the Statute of Frauds.
  • Projects that last more than a year – Under the Statute of Frauds, two parties can draft business contracts that last less than a year. Performance contracts must be in writing if they take more than a year to complete.
  • Promises relating to marriage – Any promise made in connection to marriage or divorce needs a contract. This includes gifts such as an engagement ring and prenuptial and postnuptial agreements.

Need Help With a Contract?

There are literally thousands of binding agreements governed by rules going back almost 350 years. Choosing the best one for your particular situation may not be easy! If you need assistance with drafting a contract in California, consider hiring a legal document assistant.

At A People’s Choice, we can help you draft many different types of agreements in writing, including employment agreements, nondisclosure agreements, confidentiality agreements, lease or rental agreements, consulting agreements, bulk sales agreements, and more. Call us at 800-747-2780 to get started!

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