Orally Made Agreements
A verbal agreement is a verbal contract that occurs between two or more parties. It is made verbally, either in-person or over the phone, and does not require written documentation. However, it can still hold up in a court of law if the terms are agreed upon by all involved parties. These agreements can be more difficult to enforce than written contracts because there are no documents that prove the agreement was made.
Verbal contracts are different from written contracts because they do not require an offer and acceptance in writing. Their terms can be implied more than specified. They are usually used for smaller transactions between close friends or relatives . Written contracts, on the other hand, are used for larger transactions, such as real estate property purchases.
Even if there is no formal documentation, verbal contracts can still hold up in court if:
The terms are generally understood and agreed upon.
Payment or services have been made, so there is proof of the contract.
Witnesses can be called to testify that the agreement was not just verbiage.
There has been a breach of contract and the client is seeking damages (as opposed to specific performance).
If there is any documentation—such as an email, text, or recorded conversation—that proves each party has knowledge of the terms, the verbal contract can stand.
Contract Implied In Law
A contract is not always needed to recover on an agreement with someone. If you don’t have a written or verbal contract and money is owed, there might still be an implied contract to pay the debt.
Many courts have held that an implied contract exists when it is clear that some kind of contract exists and the parties have acted in accordance with the expectations within that contract. Examples of this are listed below.
When a company has in effect of policy of giving annual raises to its employees, an implied contract might be formed each year upon employment.
An implied contract can exist if payment is voluntarily given in a situation where a party expanding money with the expectation of reimbursement by someone else.
One common example of an implied contract is The Restatement (Second) of Contracts Sec. 45, which states that if there is an offer by one party to another that is partly accepted by the second party through actions, the first contract could be enforced despite a lack of written agreement.
If two parties act in accordance with a contract and the contract was entered into unwittingly due to the nature of the contractual agreement, implied contract law from the state usually will look favorably on the one who partially performed under the contract.
It is important to note that under the Restatements provisions previously referenced, the party accepting the contract must act in accordance with its terms before rescinding it. Some courts have ruled that a simple performance under a contract is enough to create an implied contract. Others have required that the performance of the contract be exactly in accordance with its terms.
For example, suppose a car dealership offers a five-thousand-dollar incentive on any new car sold. A prospective car buyer goes into the dealership and mentions the incentive that was advertised. The seller then sells the car to the buyer for five thousand dollars less than the sticker price. This acceptance by the seller and the buyer’s actions of purchasing the vehicle could be viewed as an implied contract. A court in the buyer’s jurisdiction would likely enforce the five-thousand-dollar reduction in the vehicle price based on the buyer’s acceptance of the five-thousand-dollar incentive created by the dealership’s offer.
Even if the manufacturer later claims to have made a mistake, the manufacturer is likely to be obliged to honor the implied contract and pay the buyer five-thousand-dollars.
Basis of a Lawsuit Without a Contract
While a contract is typically the basis for a plaintiff to sue for money in Maryland, there are situations where a plaintiff can sue the defendant for money without a contract, such as under theories of unjust enrichment and promissory estoppel.
Plaintiff’s claim against the other party as unjust enrichment, with legal principles suitable for a count for quantum meruit (which means money due), even in the absence of an express agreement between the parties. Unjust enrichment does not require an intention on the part of the wrongdoer to harm another party or benefit himself, but only that one party has knowingly received a benefit from another party and that it would be inequitable for it to keep that benefit.
Promissory estoppel is the legal principle that sometimes allows a plaintiff to sue the defendant without a contract. In some situations, although the parties do not have an enforceable contract, if one of them makes a promise to the other in order to get him or her to do something that he or she would not otherwise do. If the other party takes action or refrains from acting in reliance on the promise, the apparent inability of the promisor to complete the contract can result in financial ruin to the party who relied on the promise and as a result that person will be able to sue the promisor to get reimbursed for his or her damages.
The general rule is that an unenforceable contract with no ability to sue under some sort of general contract is enough to allow a plaintiff to sue for money in Maryland.
Proving an Agreement Exists
When there is no written contract or documentation outlining how an agreement came to be, a lawyer will look to other forms of evidence to prove the essential elements of a contract, namely the fact of mutual consent. Are there recorded conversations? Public representations made on a website or through advertising? Witness accounts? Payment records? Does this conduct demonstrate that parties intended to create a legally binding business agreement they could later enforce in court? While some courts may permit the use of a testimony of a party as the only evidence necessary to demonstrate a contract existed , it is much more likely the courts will require corroborating evidence as described above in order to prove the existence of an agreement. While the burden of proof rests with the individual making a claim, you stand a much greater chance of success if you are able to find supporting evidence for your allegations. If you are not able to find evidence, then you should consider whether you have sufficient grounds to file a civil suit.
Suing Someone Without a Written Contract
All businesses can be victims of a person or entity that does not live up to their part of the bargain. You may find yourself in this situation as a business owner, an employee, or even an independent contractor that was not paid for their work. Your first instinct may be to contact a lawyer and discuss the legal options available to you to recover the capital or wages that you are owed. The first question your attorney may ask is whether you have a written contract. This is often the crux of many "money owed" issues – the existence of a contract to prove the amount of money on the line and the terms of that contract. If you do not, there may be a bundling of challenges that complicate litigation.
The first thing needed to bring a lawsuit is to show the plaintiff’s cause of action. That means a party has grounds on which to sue someone, such as breach of contract, breach of fiduciary duty, or fraud. Oftentimes this requires having a written contract to prove what that party did.
"Without a written contract, the plaintiff must rely on a lot of circumstantial evidence that may not stand up in court. It becomes an issue of proof. Did something happen to the plaintiff that caused them to lose money, without a contract they must prove when that happened and how much it was," explains one of our corporate litigation attorneys.
However, without a written contract, it is possible to sue the party that is at fault. "We often pursue breach of contract claims to get damages, but absent a contract we will try to pursue other causes of action such as unjust enrichment. This opens the door for another cause of action – you not only need to show that someone’s installed contract was not fulfilled, but that you were damaged as well. Case law has shown that unjust enrichment exists where a party knowingly accepts a benefit of another, which would be unconscionable to retain it without compensating the other party."
Precautions and Legal Guidance
In almost every situation, talking with a lawyer is your best option. First of all, the overall questions of liability are always very fact-specific. A lawyer familiar with the facts will be able to give you the best answer for your particular situation. Second of all, the lawyer, after becoming familiar with your individual circumstances, will find potential issues which normally one would not think about at all. How soon should you seek advice from a lawyer? As soon as you are aware there is a potential problem. A good lawyer may want to start work on that day, or as soon as possible. As mentioned in part one above, if the statute of limitations runs out (the time period within which a lawsuit must be filed) it could very much negatively impact your case. In Pennsylvania, there is a two year statute of limitations for many different types of cases including personal injury, medical malpractice, and sexual abuse victims . If the person is in a circumstance where he or she could get sued without a written document, the best possible thing is to get together contract terms before a problem comes up. For example, someone does some work at a foreign country. A long discussion leads to an oral agreement between the worker and the company who needs the work. There is no written agreement because this country has no way to enforce a contract, and what is really needed is for the worker to follow a particular process to make a product. Since it is best practice for someone getting ready to contract to talk about every aspect before work begins, it would be best practice to insist on a written contract, even when every one knows that it will not be enforced anyway. If you don’t do business like this regularly, it is probably best to just have a lawyer review your contract with you, and get help in understanding what the potential risks are, and what needs to be included if a written contract will be enforceable.