Enforcing an Oral Contract: What Small Business Owners in Los Angeles Need to Know

Small business owners rely on contracts to protect themselves and their businesses in various transactions. While it is preferable to have written contracts, oral contracts can also bind parties under certain circumstances. However, enforcing an oral contract can be challenging, and small business owners should understand the legal implications of oral contracts before entering into them.

Exploring the Nature of Oral Contracts

An oral contract, also known as a verbal agreement, is a legally binding arrangement established through spoken communication rather than written documentation. In such contracts, the parties involved mutually agree upon terms and conditions without reducing them to writing. While oral contracts can hold legal validity, their enforceability can be challenging due to the absence of written evidence. In the event of disputes or litigation, proving the existence and specific terms of an oral contract can be complex, as it relies heavily on the credibility and recollection of involved parties and potential witnesses.

The Statute of Frauds and Its Implications

In California, the Statute of Frauds (Civ. Code § 1624), imposes requirements on certain types of contracts to ensure their integrity and enforceability. The Statute requires you to have these contracts be in writing to be considered enforceable under the law. Such written contracts provide a higher level of certainty and evidentiary support, ensuring transparency and reducing the potential for disputes.

Under California law, the following agreements must be in writing:

• Contracts related to the sale of real property;

• Agreements that extend beyond one year;

• Contracts to loan or extend money for more than $100,000;

• Real estate broker or agency agreements;

• An agreement that, by its terms, cannot be completed within the life of the promisor;

• Agreement to pay the debt of another;

California Statute of Limitations for Oral Contracts

In California, the statute of limitations for oral contracts is two years from the date the cause of action accrues. This means that if a party wishes to enforce an oral contract, they must file a lawsuit within two years of the breach or dispute. If you fail to file within this timeframe, the statute of limitations may bar the claim.

Enforcing an Oral Contract

To enforce an oral contract, a party must first prove that a valid oral agreement exists. This can pose a challenge as you and the other party rely on verbal exchanges for oral contracts, which may lack documentation. It is important to gather any evidence that supports the existence of the oral agreement, such as correspondence, emails, or witness testimony.

If a party can prove the existence of the oral contract, they can file a lawsuit to enforce it. However, it is important to note that enforcing an oral contract can be challenging. Especially if the other party denies the existence of the contract or disputes its terms.

In conclusion, while oral contracts can be binding under certain circumstances, small business owners in Los Angeles should carefully consider the legal implications of entering into an oral agreement. The Statute of Frauds and California statute of limitations for oral contracts can make enforcing these types of agreements challenging. We always recommend consulting with an experienced small business lawyer in Los Angeles before entering into any contractual agreement. Whether written or oral, to ensure the protection of your legal rights. At Rokita Law, P.C., our team of skilled attorneys are ready to assist small businesses in achieving success by providing comprehensive legal services for various business transactions. Contact us today to schedule a consultation.

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Rokita Law, P.C. provides the content on this post for informational purposes only. The information should not be construed as, nor is intended to be, legal advice.⁠ Results may vary. This is not a guarantee, warranty, or prediction regarding the outcome of your case. Posts are for educational purposes only and are based on California law only, except for trademarks and copyrights filed with the US Patent and Trademark Office (USPTO).⁠