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Are Oral Contracts Enforceable?

Most would likely advise that any business transactions conducted in Parsippany be handled professionally. For many, “professionally” likely means through negotiation, in writing and (if necessary) with the added assistance of legal counsel. However, due to the unique nature of your business (or your own personal beliefs and values), you still might see the value in a handshake agreement. While such trust between business partners may help to build brand loyalty, it can also be a source of stress if issues ever arise in your attempts to enforce your agreements.

This brings up the question of if oral contracts are enforceable. New Jersey state law actually only lists a few types of contractual agreements that must be in writing. According to the state’s Statute of Frauds, the only of these types that might apply to business are cases involving loans in excess of $100,000 or agreements by creditors to forgo their rights to seek legal remedies based on an agreement with a debtor. Any other type of contract (whether it be written or verbal) is enforceable.

New Jersey law requires the following elements to be present in every contractual agreement:

• Offer and acceptance
• Meeting of the minds (both sides understanding their agreement)
• Consideration
• Clarity

From this perspective, the better question to ask may be if you can prove an oral agreement had each of these elements. E-mails, work orders, checks or bank transaction records might serve as proof that there was indeed communication regarding your agreement, that money did change hands, and that you either provided or received services in exchange. A continuing pattern of such records might certainly be viewed as an understood contractual agreement.

Outside General Counsel Solutions

If you would like more information on this issue or if you are a small business owner in need of guidance, please contact us today. At Santomassimo Davis LLP, our team of lawyers, experienced in compliance, can help effectively minimize your company’s risk and avoid the unnecessary liabilities many businesses unknowingly face.

Understanding how this affects the small business economy is part of our job here at Santomassimo Davis LLP, as we primarily focus in providing expert Outside General Counsel for a variety of law firms and legal issues related to Corporate and Business Law in New Jersey, New York and Pennsylvania.

Thanks for reading our latest blog talking about topical legal issues facing small businesses. Learn more from our Outside General Counsel Blogs.

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