In a perfect world, all contracts would be in writing, signed by all the parties and free of ambiguity. But this isn’t a perfect world, and every day people enter into verbal agreements with one another. Are these oral promises legally binding?
In Maryland, verbal agreements, also called oral agreements or oral contracts, may be legally binding, provided they meet certain criteria.
Let’s look at an example.
You and your business partner meet with a graphic designer for the purpose of having a website built for your business. You have a productive meeting in which you discuss the scope of the work to be done, the time frame for delivery and mutually agree on a price. You realize you are running late for another appointment, however, so you and your partner leave the meeting without any of the things you discussed in writing.
Fast forward many months. The designer has failed to complete the work as promised even though you have already paid for it. Can you bring a lawsuit to recover damages for breach of the verbal agreement?
In Maryland, yes.
While memorializing all of an agreement’s terms in writing is always preferable to having a verbal agreement for the sake of clarity — especially in a business context — oral contracts may be enforceable in Maryland if the obligations of each party to the contract are clear and unambiguous.
Accordingly, if you have incurred damages as a result of the breach of a verbal agreement, you might be able to recover compensation for your financial injuries, but there are some requirements you’ll have to meet to secure a judgment in your favor.
Enforcing a Verbal Agreement
In order to enforce a verbal agreement, you must bring a lawsuit against the breaching party no later than three years from the date of the breach under the statute of limitations in Maryland.
All contracts, whether oral or written, require an offer, acceptance of the offer and consideration. An offer is a proposal to either do something or refrain from doing something. Acceptance is another party agreeing to that offer. Consideration is value exchanged for the agreement between the parties.
In order to enforce an oral agreement, a plaintiff must first establish all of the above basic contract requirements. In the example above, since your business partner was also present at the meeting, he or she could corroborate your contention regarding the formation of the verbal agreement. Your business partner isn’t exactly an impartial observer, however, so even that testimony might not be enough to convince a court that you and the designer reached an oral agreement.
If so, a court may require additional types of proof to establish that a contract existed. Emails or text messages with the designer referencing the agreement, for example, could help build your case, as could evidence of your payments.
Maryland courts also want to make sure that the terms of the verbal agreement were sufficiently clear to inform both parties as to their obligations. Maryland law requires that an oral contract be “sufficiently clear and definite in order that the courts … may be able to know the purpose and intention of the parties.”
Of course, to prove you are owed damages, you must also show a breach of the verbal agreement as well as harm, which in the above example, wouldn’t be difficult if the work wasn’t completed even though it had been paid for.
Generally, if a court finds one party has breached a verbal agreement, it may choose to award damages, commonly compensatory damages, which place the non-breaching party in the position he or she would have been in but for the breach.
Other remedies possibly include cancellation of the contract or a claim for rescission, which is intended to place the parties in the positions they were in before the making of the contract.
Statute of Frauds
One important consideration regarding the enforceability of a verbal agreement is whether it falls under the Statute of Frauds, which requires that some types of contracts must be written to be enforceable. In Maryland, the types of contracts that must be in writing in order to be enforced by a court include the following:
- Promises made on consideration of marriage
- Agreements to pay off the “debt, default, or miscarriage of another person”
- Any agreement that cannot be performed within one year
- Sales of goods for the price of $500 or more
- Sales of land and leases for land lasting for more than one year
As with most rules, the Statute of Frauds has exceptions. If the verbal agreement falls under one of the exceptions, it may still be enforceable. For instance, even when there is a verbal agreement for the sale of goods for $500 or more, if the goods are “specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business,” a court may enforce the oral contract.
Overall, enforcing a verbal agreement can get tricky, particularly because of the types of proof a court may require to establish that a contract existed. For this reason, you should seek professional legal advice to determine the best way to proceed in your situation. If you’ve suffered damages because of the breach of a verbal agreement, call us at (410) 752-2468 or send us a message and let’s get the conversation started.