Whether a person is arguing about an agreement or simply pondering the implications of certain conversations, the common refrain of countless TV shows and movies comes to mind: “I didn’t sign anything.” However, relying on this promise of protection in the wrong circumstances can lead to catastrophic results.
The Truth About Unwritten Contracts
In truth, oral contracts, in most cases, hold the exact same legal power as written ones, and the average person makes them every day. In fact, the law even takes the flexibility of contracts a step further, finding contracts to exist even in cases where people’s actions, rather than their words, meet the requirements of a contract. The most common example is grabbing a candy bar or bag of chips off the shelf of a convenience store. In doing so, the owner of the store has agreed to give the customer possession of that snack in exchange for the promise that the customer will pay for it before leaving.
Contract Requirements
Despite this flexibility, not just any agreement will do. To be valid, an oral or implied contract must meet all the same requirements of a written one. Put very simply, these requirements can be boiled down into five elements. The first two elements require an offer followed by an acceptance. Both of these components can be stated in words or implied by a person’s actions. Third, the contract must have consideration, or a bargained-for exchange. Essentially, this requirement means each party must receive some benefit from the contract, although what counts as consideration can be very minimal. Fourth, the parties must have the physical and legal capacity, or ability, to make the contract. Finally, the object of the contract must not be illegal; a contract for murder is no contract at all. If these requirements are met, the parties may have a valid contract, regardless of whether there is a written document.
There are several major exceptions to this general rule, however. For example, Alabama law outlines several broad categories of contracts, such as contracts for the sale of land, that require people to set out their bargain in a written document in order to form a legally binding agreement.
The Downside of Unwritten Contracts
The irony of unwritten contracts is that they are, outside of the everyday situations in which they are so common, generally a terrible idea. Should a dispute occur, the wronged party will be forced to prove in court that each contract requirement was met without the benefits of a written document, driving up legal fees in a major uphill battle of “he said, she said.” Therefore, if someone finds himself on either side of a dispute over an oral or implied agreement, as with all legal issues, the best first step is to consult with a contract lawyer.
If you or your company is interested in forming a binding agreement with someone or wants to learn more about Alabama contract law, contact Anderson Cullen at (469) 559-8657 or info@andersoncullen.com to set up a consultation. Every situation is different, and no strategy works in every case. Together, we can figure out the right approach for your situation.