Also known as: verbal contracts · oral contract · oral contracts
Written by attorneys — see sources below.
A contract formed by spoken words or conduct rather than by a signed writing. Such an agreement creates mutual obligations but remains subject to the statute of frauds when it falls within an enumerated category requiring a memorandum signed by the party to be charged.
Viktor Voronin and Valentina Vasquez reach an oral agreement for the sale of equipment. Viktor mails a signed letter describing the terms but omitting Valentina's name. The envelope bearing her address arrives with the letter. The documents together satisfy the statute of frauds and bind Viktor.
Vito Villarreal and Violet Vang orally agree that Violet will supply parts for six years. After Violet repudiates two years later, Vito prepares and signs a detailed memo reciting the original terms. The memo satisfies the statute of frauds even though it was created after breach.
Vera Vu orally promises to leave her house to Veronica Villanueva if Veronica moves in and cares for her for life. Veronica sells her business and provides care until Vera dies. No signed memorandum exists, so the verbal contract remains unenforceable under the statute of frauds.
In June 1918, James A. Halsey, an old man and a widower, was living without family or housekeeper in his house in Hornell, New York. He told the plaintiffs that if they gave up their home and business in Andover, New York, and boarded and cared for him during his life, the house and lot with its furniture and equipment would be theirs upon his death. The plaintiffs did as he asked, selling out an interest in a little draying business in Andover and boarding and tending him until he died about five months after their coming. Neither deed nor will nor memorandum subscribed by the promisor exists to authenticate the promise, and the plaintiffs ask specific performance. During Halsey's lifetime the plaintiffs had no possession of the property and did not occupy it as owners. Halsey retained possession, and the plaintiffs lived with him merely as his servants or guests who could be asked to leave at any time. The plaintiffs paid food bills and performed housekeeping work while Halsey paid the taxes and upkeep costs. There were ties of kinship between one of the plaintiffs and Halsey.
View caseVanguard Bank orally agrees to sell a vacant lot to Velocity Logistics. Velocity sells its current headquarters and deposits the proceeds in reliance on the oral promise. The substantial, foreseeable changes in position allow equity to enforce the verbal contract despite the missing writing.
Mrs. Gladys Green owned a lot known as Lot S in the Manomet section of Plymouth. In July 1980 she advertised the lot for sale. On July 11 and 12 of that year, Mr. and Mrs. Hickey met with Mrs. Green to discuss purchasing the lot and reached an oral agreement to buy it for $15,000. On July 12 the Hickeys gave Mrs. Green a deposit check for $500. The check was marked on the back with the notation "Deposit on Lot . . . Massasoit Ave. Manomet . . . Subject to Variance from Town of Plymouth," but the payee line was left blank. Mrs. Green held the check without filling in the payee name, cashing it, or endorsing it. By July 16 it was determined that no zoning variance would be required. Relying on the arrangements with Mrs. Green, the Hickeys advertised their house on Sachem Road for sale in newspapers on three days in July 1980. They agreed to sell their house to a purchaser and accepted a $500 deposit check from that purchaser, which they deposited in their own account. On July 24 Mrs. Green informed the Hickeys that she no longer intended to sell the lot to them and had decided to sell it to another buyer for $16,000. The Hickeys offered Mrs. Green $16,000 for Lot S, but she refused the offer. The Hickeys filed a complaint in the Superior Court seeking specific performance of the agreement with Mrs. Green. The case was presented on a stipulation of facts with attached documents, which the Superior Court judge adopted as findings. The trial judge granted specific performance to the Hickeys. Mrs. Green appealed the decision to the Appeals Court of Massachusetts.
View caseVega Motors' founder orally promises to share earnings and property with his partner if she supports his career. She forgoes her own opportunities and contributes to the business for years. The verbal contract claim for property division is rejected because Illinois does not recognize such implied agreements between unmarried cohabitants.
In June 1960, while students at Grinnell College in Iowa, Victoria Hewitt became pregnant by Robert Hewitt. Robert told Victoria that they were husband and wife and would live as such without a formal ceremony, and that he would share his life, future, earnings, and property with her. The parties announced to their parents that they were married and held themselves out as husband and wife thereafter. Victoria devoted her efforts to Robert's professional education in pedodontia, obtaining financial assistance from her parents, and assisted in his career by placing her payroll checks into a common fund. Three children were born to the parties during their relationship, which lasted until 1975. By that time, Robert earned over $80,000 a year and had accumulated substantial property, some held jointly and some separately. Victoria initially filed a complaint for divorce, but at a hearing on Robert's motion to dismiss, she admitted that no marriage ceremony had taken place and that the parties had never obtained a marriage license. The trial court dismissed the complaint, finding no ceremonial or common law marriage existed, and directed Victoria to make her complaint more definite regarding the property. Victoria then filed an amended complaint alleging an express oral contract to share property, an implied contract from the parties' conduct, a constructive trust based on fraudulent assurances, and unjust enrichment from her detrimental reliance. The trial court dismissed the amended complaint, finding that Illinois law and public policy require such claims to be based on a valid marriage. The appellate court reversed, and the Supreme Court of Illinois granted leave to appeal.
View caseVolta Electric royalty owners sue over an oral understanding concerning interest on delayed payments. The verbal contract is asserted in a nationwide class action. The Court holds that the forum state may apply its own choice-of-law rules to determine whether the oral agreement is enforceable.
Phillips Petroleum Company, a Delaware corporation with its principal place of business in Oklahoma, produced or purchased natural gas from leased land in 11 states during the 1970s. It sold most of the gas in interstate commerce at prices regulated by the Federal Power Commission, later the Federal Energy Regulatory Commission. Beginning in the mid-1970s Phillips proposed price increases. It collected higher amounts subject to refund with interest if disapproved. Phillips suspended royalty payments to lessors until final Commission approval. It paid the suspended royalties of $3.7 million in 1976, $4.7 million in 1977, and $2.9 million in 1978 without interest after the increases were approved. In 1979 the Commission began investigating overcharges. In 1983 it issued an opinion ordering refunds. Royalty owners Irl Shutts, a Kansas resident, and Robert and Betty Anderson, Oklahoma residents owning leases in Oklahoma and Texas, filed suit in Kansas state court seeking interest on the suspended royalties. They sought to represent a class of 33,000 royalty owners later reduced to 28,100 members after 3,400 opted out and 1,500 could not be notified. Fewer than 1,000 class members resided in Kansas and only about one-quarter of one percent of the leases were located there. The Kansas trial court certified the class under a state statute modeled on Federal Rule of Civil Procedure 23 on an opt-out basis. It sent first-class mail notice describing the action and the right to opt out. The court applied Kansas law to award interest at Commission rates followed by the Kansas post-judgment rate of 15 percent. After the Kansas Supreme Court affirmed, the United States Supreme Court granted certiorari in 1984.
View caseA verbal contract satisfies the statute when a signed writing by the party to be charged, or writings that may be read together, contain the essential terms. The signature may appear anywhere if adopted with intent to authenticate, and separate documents may be combined if they clearly relate to the same transaction.
Yes. A memorandum sufficient to satisfy the statute may be made or signed at any time, including after breach or repudiation. No requirement exists that the writing be contemporaneous with contract formation.
Equity may enforce an oral land contract when the buyer has reasonably and substantially relied on the agreement and the seller's continuing assent, changing position so significantly that only specific performance avoids injustice. Permanent improvements and business restructuring that are clearly referable to the sale satisfy this standard.
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Restitution remains available for the reasonable value of services or benefits conferred, even though the contract itself cannot be enforced. Recovery prevents unjust enrichment without amounting to enforcement of the oral bargain.
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