What do business owners need to know about verbal contracts?

Verbal contracts may be legally upheld in many cases. However, proving the terms of a contract in court may be difficult.

For those who own businesses in Georgia and elsewhere, contracts are an everyday part of the job. New hires and bosses sign employment contracts, business owners use contracts with their subcontractors and customers often sign contracts for numerous services or products. Most of the time, an agreement between parties is in writing. However, someone might decide to use a verbal contract instead. Depending on the type of job, it may be possible to uphold the terms of an oral contract in court.

However, is it wise to employ a verbal contract instead of a written one? This type of agreement may be especially attractive to small business owners or independent contractors, who might prefer a more informal and friendly way of doing business. However, friendliness aside, it may be smart to consider the complications that could arise if there were a contract dispute, but no written contract to back up the claims.

Why would a verbal contract be used?

An independent consultant, such as a computer repair person, might be accustomed to doing business based on verbal agreements with his customers, instead of printing up a contract. He may have prices and terms listed on his website and feel that this is sufficient for his customers to understand and agree. The owners of a small mom-and-pop grocery store might have a long-standing agreement to trade goods or services with a neighboring business, and feel that their friendliness does not necessitate a formal contract. A seamstress who makes clothing out of her home might not wish to draw up a contract if she is doing work for a friend.

In any of these cases, a verbal agreement could work out as long as everyone involved is satisfied with the end result. However, states the Houston Chronicle, disagreements over payment, the quality of the work or other company issues could complicate the arrangement without the agreement being in writing.

Statute of Frauds considerations

Contract disputes involving oral agreements may be upheld in court if the parties involved are able to prove their side. This, understandably, can be difficult if there was nothing in writing. In some cases, verbal contracts cannot be legally upheld. The United States Statute of Frauds requires written contracts in the following instances:

· Marriage agreements

· The sale of real estate or land property

· A task or job that is expected to take one year or longer to complete

· A transaction of $500 or more

· Agreeing to take over someone else's debt

Business owners and independent contractors in Georgia may be wise if they utilize contracts in their dealings, regardless of wanting to be friendly or informal. It may help to speak with an experienced business law attorney.