An oral employment contract is just as binding as one in a written agreement -- but it's much harder to prove in court.
[Subject: Normally bold, summarizes the intention of the letter] -Optional-
Dear [Recipients Name],
I am sending you this email so you can review the conditions we decided yesterday when we spoke on the phone and to get confirmation from you that they are correct.
As was discussed yesterday, we have both agreed to move the deadline for the landscaping project to the 23rd of April and have found it favorable to add $200 to the total cost. It means that the total fees that need to be paid are at $3800.
Please confirm that these terms are correct by signing your name that is listed in the box below. If you have any concerns, you can reach me at 333-3333. Thank you.
[Senders Title] -Optional-
[Enclosures: number] - Optional -
cc: [Name of copy recipient] - Optional -
Further things to consider when writing confirmation letters to vendors
Confirmation letters are letters sent by individuals, businesses, or companies to summarize details such as verbal agreements between two parties, job interviews, or appointments. Broadly speaking, they are written to verify certain details upon request or recognize previous agreements. A confirmation letter can serve as a formal document to confirm the receipt of orders, schedule of an important appointment, or recruitment of new employees. It can also be used to confirm travel arrangements and reservations and in instances such as immigration to confirm marital status. Confirmation letters are mostly used by businesses to keep formal records and to avoid conflicts regarding transactions or agreements.
Confirmation letters are brief and contain only the necessary information. State what is being confirmed clearly and accurately. If you are verifying an employee's position in the company, for example, take note of his/her official title. Be cautious about times, dates, and places. Include all relevant details and anything else that needs to be confirmed. If necessary, restate the previously agreed terms and conditions to ensure that there are no conflicts or misunderstandings in the future. Close the letter with a positive remark and your signature. This letter should be printed on the company's letterhead.
Letters to vendors are letters written to people or companies offering goods for sale. These letters could be written to inquire information about a product, terminate a contract with a vendor, or to inform a vendor of relocating of business. If you own a company, writing to your vendors is important as it provides you and the recipient with proof that you actually requested something or took action regarding an issue. It is also an effective way to communicate sensitive information that may not be communicated on the phone.
Letters to vendors must be written in the standard business letter format and should use an official letterhead. Start the letter with a statement that informs the recipient of the purpose of your letter. Explain the letter in details providing all the important information. For instance, if you are writing to terminate your contract with the recipient, mention the date when you want to effect the change. However, if your letter is to inform the recipient of your business relocation, you should provide the new business location and address. Be brief and use a professional tone. Finish on a positive tone and sign the letter with your full name.
Oral contracts are spoken agreements that are sometimes legally binding. The problem proving an oral contract is the lack of tangible evidence.
Floyd is casually talking to his neighbor Arnie while raking some leaves. With frustration, he says to Arnie, 'I'll give you my new boat if you cut down that tree that keeps shedding its leaves all over my lawn.' Arnie laughs and says, 'It's a deal!' A week later Arnie cuts his tree down, then drives his truck over to Floyd's, hooks the new boat, and puts it in his own driveway. Needless to say, Floyd's not happy, and he confronts Arnie who refuses to give him back the boat. If they went to court, who'd win?
An agreement is when two or more people all come to a similar understanding, whereas a contract is defined as 'a legally enforceable agreement between two parties.' With only a few exceptions, there is no requirement that an agreement be written before it will be enforced as a contract. However, the court will look to see if all of the elements of a contract are present before determining a contract exists.
|Offer||The offering party presents to the other party the that they will give something or do something (or refrain from doing something), in exchange for something (or refraining from something) from the other party.|
|Acceptance||The offer was agreed upon, as is, and clearly and unambiguously accepted by the other party. The acceptance must exactly match the offer; if any terms are added, deleted or changed, this becomes a rejection and a counter-offer.|
|Consideration||The heart and subject of a contract. Consideration exists if both sides will receive a benefit and an obligation. Anything short of both sides receiving a benefit and incurring an obligation, then there is no consideration and no contract.|
|Competency||Both parties must be over 18 and of sound mind.|
|Legality||The subject of the contract must be legal before a court will recognize and enforce it.|
If the elements of a contract are written and signed by all the parties, then it's enforceable. If they are discussed and verbally agreed upon, that that's a contract as well. So what's the difference? The most obvious is with a written contract, the terms are spelled out and recorded in the document making it easier to determine the terms.
For example: While Jed was shooting at some food for his family, he discovered oil on his property. Now he wants to move the family to Beverly Hills, so he asks Ted to manage his oil pumps. He writes up a written agreement that obligates him to pay Ted, and in consideration for the pay, Ted will operate and manage the oil business. Both parties sign the document.
This is an enforceable contract as the terms are written and both parties have signed indicating that the offer made by Jed and was accepted by Ted. There was an offer, acceptance (indicated by the signatures), consideration (both parties get and give), competency (both are adults and of sound mind) and legality (oil is legal).
On the other hand, let's say there was nothing written, but they verbally agreed to the same terms. Since they are both competent adults and oil is legal, its a contract. So what's the problem? The answer is nothing, until Jed just stops paying Ted. Then if Ted took him to court, he'd have to prove to the court that a contract existed. If Jed said they never agreed on anything, is Ted out of luck?
A verbal contract is also called a parol contract. The word parol means given or expressed verbally, and historically, the courts have recognized parol contracts as valid if the terms can be determined. This can be done by the actions of the parties. If both behaved like a contract existed, then that conduct can be used to indicate the current terms. In Jed's case, the court can look at the history of Ted managing the oil business and Jed paying him. So the court can determine that, from the time Jed stopped paying until the time Ted stopped managing, Jed would have to pay Ted the same rate he always paid him.
Over the years, most states have passed laws placing some limits on verbal contracts. Typically they deal with the statute of limitations and the sale of land. The statute of limitations (the time you have to file a claim after an event) is typically shorter for a verbal contract. Depending on the state, written contracts have about an eight to ten year statute of limitations, while verbal contracts have one to three. There is also a doctrine called the statute of frauds, and it says land sales must be in writing. This is to prevent fraudulent claims against land ownership.
So what about Floyd and Arnie? Floyd told Arnie that if he cut his tree down, Arnie gets the boat. But wait, isn't the boat worth more than the value of taking down the tree and raking fewer leaves? Typically courts don't look at the value of the consideration for a contract. If someone wants to sell their car for a dollar, that's up to them. However, before we start crying for Floyd, we do have to look at the offer and acceptance. Was a real offer made? Was he joking? Does the fact that Floyd made the offer in a moment of frustration, and the fact that Arnie laughed in response, negate the offer? You be the judge.
A verbal agreement is just as valid as a written one, however there are restrictions placed on verbal contracts. There are some things, like land, that have to be in writing. The statute of limitations is shorter for a verbal contract. Also, it's much more difficult to prove the terms of a verbal contract than those of a written one. To prove the terms of a verbal contract, the court can look at the past dealings of the parties. However, notwithstanding those limitations, verbal contracts can just as enforceable as the written contracts.
A reliance letter can put teeth in an oral agreement.
2 min read
This story appears in the June 2006 issue of Entrepreneur. Subscribe »
It's not that oral agreements aren't as binding as written ones. They're just much harder to prove.
So when you can't get it in writing, a reliance letter is a good second choice. Simply send your opponent a letter confirming the terms of your oral agreement with a legal hook at the end: "If this letter is not consistent with your under-standing, please notify me in writing immediately." It warns the other side that you're about to spend time and money or lose other opportunities because of your deal. Now the onus is on them to tell you otherwise. The longer they wait to respond, the more you "relied" and the more binding the deal becomes.
It's wise to give them a deadline to notify you to the contrary and copy people on your letter for backup. You could also soften the language: "Please let me know if I haven't described our deal accurately." A well-executed reliance letter is a real sleeper. Luckily, it's simple to counter one: Always set the record straight when you receive an inaccurate communication.
Great file-keeping is also a must. Take fresh and accurate notes of events and conversations. Preserve evidence. Hold on to all paper-work, and keep track of photos, witnesses, videotapes and physical evidence. These habits will not only strengthen your negotiating, but also position you well for any lawsuit.
A speaker and attorney in Los Angeles, Marc Diener is author of Deal Power.
Oral contracts are verbal agreements between two parties. An oral contract occurs when spoken words are rendered valid and legally enforceable in a court of.
Enforcing Verbal Contracts When You Are Self-Employed
When you’re self-employed, when you are an entrepreneur or freelancer, you wear a lot of hats: you’re the boss, the intern, the accountant, and the brand ambassador. The buck starts and stops with you. Every time you make a promise, quote a price, or sign a deal, you are putting your reputation on the line. And an issue that often comes up is – how do you deal with a verbal contracts and the conflicts that can arise from them?
In the age of instant feedback, a customer who feels betrayed can log on and let loose with blistering speed, blasting your freelance business on Yelp, Facebook, or Angie’s List before you can even say, “misunderstanding.”
Legally, verbal contracts are just as valid as written ones. The problem is overcoming the burden of proof…
It’s great to be the boss, but be forewarned: bosses take a lot of flack. You’re closing deals over the phone, making promises in coffee shops and cars, signing with a handshake rather than a pen—in short, you’re moving at the speed of business—but when a deal falls through, you are in the hot seat. And as a solopreneur, you’ll have days when you feel like you’ve got a target on your back. That’s why you need to understand your rights and responsibilities when it comes to verbal contracts.
If you have to break a promise, are you liable? If someone makes a verbal promise, is it enforceable? If you have been stiffed by a deceitful client, are you out of luck?
It all depends.
Legally, verbal contracts are normally just as valid as written ones. As with any contract, three things are required to create a contract, verbal or otherwise:
Consideration is a bargained-for exchange –“I’ll do this if you pay me that.”
The real problem is overcoming the burden of proof: if you want to sue for breach of contract, then you’ll need to prove that the contract existed in the first place, which can be difficult if the only record is a phone call. Did anybody overhear your agreement? Are there secondary documents to back up your claim? It’s tough work to convince a judge with, “he said, she said” arguments, and that’s why Samuel Goldwyn famously said, “A verbal contract isn’t worth the paper it’s written on.”
Did your client really promise ten grand? Of course! But just try and prove it…
Often the best way to prove that you had a verbal contract if in fact you have no physical proof, is in the actions of the parties.
Often the best way to prove that you had a verbal contract if in fact you have no physical proof, is in the actions of the parties. Why did you deliver 1,000 widgets without a written deal? Not to be a nice guy of course, and as such, the logical conclusion is that you must have had a contract to sell the other party 1,000 widgets.
Verbal contracts can be proven by actions, if not written words.
Exceptions, Provisos, and the Fine Print
Any verbal promise to perform a service that you agreed to is a valid contract. However, certain types of contracts must be in writing (called the “statute of frauds,”) and if the contract is not in writing it is not legally valid. For instance, agreements to sell property or real estate, IOUs, and any contract that can’t be completed in less than one year all fall under this rule.
Additionally, every state has its own statute of frauds. If you plan on making verbal agreements in the future, it would behoove you to take a few hours to research your state’s statutes, and check out some of the info our friends at LegalZoom offer. A penny’s worth of research can save you thousands of dollars (two words you never ever want to hear – legal fees!) down the line.
With those provisos in place (get it in writing next time!) there are a few guidelines to follow when making a verbal agreement to ensure that it doesn’t boil down to “your word against theirs.”
It goes without saying: the best way to deal with a botched verbal contract is to avoid the whole mess in the first place. Get it in writing. People remember things differently. People don’t remember. People lie. So ask your clients to sign some simple paperwork. This is business, after all, and anyone who balks at written contracts is likely to pull a disappearing act once the bill comes due.
Also, if the project has a fixed fee, insist that your clients pay a portion of the price up front. Again, this is a standard practice. If a client is reluctant to pay a deposit, then you might want to wish them well and send them on their way. The bottom line: try to avoid major disagreements and the desire to sue because in the world of small business, once a disagreement goes to court, both parties tend to lose, regardless of the outcome.
Sample letters to confirm an oral agreement. This letter summarizes the verbal agreements made between Robert Johnson of Springfield, Kansas, and Jane.