A common myth about contract disputes is that all contracts have to be in writing and signed. Unwritten contracts are commonly referred to as “oral contracts” or “oral agreements.” Oral agreements are quite common and usually fairly innocuous. For instance, if you go to a Tex-Mex restaurant, order a delicious dinner of enchiladas gorda off the menu, and you accept the food from the waiter, then you have a binding oral contract.
In my practice, I often handle litigation that involves both written and oral contract disputes. They are usually quite serious and range from disagreements over construction projects to employment termination to partnership dissolutions. These problems frequently arise because different individuals perceive things differently. For instance, suppose two people are looking at the clouds. One person might see the letter “S” and another might see a snake. Other times, one party was simply trying to take advantage of the other’s good or trusting nature. Below are three of the most common lawsuit claims that arise from oral contracts:
Oral Contract Dispute #1: Quantum Meruit
Quantum Meruit is basically a claim in fairness. One party provided services or materials and expected compensation, the other party knew or should have known that compensation would be expected, but compensation was never provided. One example of this is when a semi-conscious individual receives emergency lifesaving treatment by a doctor in a hospital emergency room. In a semi-conscious state, we would not expect the individual to have the presence of mind to form a contract. But, it is a matter of fairness for the doctor to be compensated for his or her work.
Oral Contract Dispute #2: Promissory Estoppel
Promissory Estoppel is a claim that a promise was broken. One party promised to do something, the other party relied on that promise, but the promising party broke the promise. Here is a common situation in which contract disputes involving promissory estoppel arise. An individual agrees to make a charitable gift to Miscellaneous Charities. Miscellaneous Charities then calculates that gift in its annual budget and spends its funds accordingly. It would be unjust if the individual changed his mind after the point at which it would injure Miscellaneous Charities.
Oral Contract Dispute #3: Suit on Sworn Account
A Suit on Sworn Account is normally when one party provides goods or services which were accepted but not fully paid for. This type of contract dispute can be either oral or over a written contract. It is referred to as a Suit on Sworn Account because the seller files this type of lawsuit with a “sworn” affidavit that attaches a record of the “account,” which is basically an accounting of the amount of money that is due.
All of that said, there are some types of contracts that must be in writing-and requirements can vary by state and jurisdiction, often depending upon their Statute of Frauds. [1] The Statute of Frauds was created to ensure that individuals do not fraudulently injure others by lying about their agreements on certain types of matters. While there are entire books on the Statute of Frauds that can provide an in-depth explanation, this is a list of some of the basic agreements that must be in writing: promises made for marriage (ex. He promised me a Trump Tower condo if we married.), an agreement that cannot be performed and completed within one year, the transfer of real estate, certain promises by executors of estates, the sale of goods worth $500 or more, and surety (ex. She promised to pay my student loans.).
[1] For instance, the Texas Statute of Frauds is in the Texas Business & Commerce Code, Chapter 26. It states that certain types of contracts must be in writing and signed. This applies to certain promises by executors or administrators, the debts of others, marital agreements, real estate sales, real estate leases of over a year, agreements which are not to be performed with one year of the agreement, certain commissions and sales, and certain types of physician or health care provider agreements.
To learn more about contract disputes, see http://www.rainminnslaw.com/contract_dispute.html