Are verbal agreements binding in Utah?

April 9, 2018 - Posted by: admin - In category:

taxes - No Responses

Is a handshake deal valid? Can you enforce a verbal agreement?

Verbal agreements can be enforceable as a general matter.  However, there are exceptions to this principle.  Per the Utah Statute of Frauds, found in Title 25, Chapter 5, certain types of agreements must be evidenced by some form of writing.  Below are examples of such items which are not enforceable via verbal agreements, per the statute:

25-5-3 Leases and contracts for interest in lands.
Every contract for the leasing for a longer period than one year, or for the sale, of any lands, or
any interest in lands, shall be void unless the contract, or some note or memorandum thereof, is
in writing subscribed by the party by whom the lease or sale is to be made, or by his lawful agent
thereunto authorized in writing.

25-5-4 Certain agreements void unless written and signed.
(1) The following agreements are void unless the agreement, or some note or memorandum of the
agreement, is in writing, signed by the party to be charged with the agreement:
(a) every agreement that by its terms is not to be performed within one year from the making of
the agreement;
(b) every promise to answer for the debt, default, or miscarriage of another;
(c) every agreement, promise, or undertaking made upon consideration of marriage, except
mutual promises to marry;
(d) every special promise made by an executor or administrator to answer in damages for the
liabilities, or to pay the debts, of the testator or intestate out of his own estate;
(e) every agreement authorizing or employing an agent or broker to purchase or sell real estate
for compensation; and
(f) every credit agreement.

Assuming that a verbal agreement does not fall into one of the categories listed above (or elsewhere in the Utah Statute of Frauds), then to have an enforceable verbal contract, you must still meet the basic requirements for a contract under common and statutory law.  For example, every valid contract must include an offer and an acceptance.  This means that an offer of an agreement must be made by one party and such offer must be validly accepted by another party before the expiration or revocation of such offer.  Therefore, consider a situation where I get my megaphone and walk down main street announcing to one and all that on Monday that I will sell my bike for $200 to the first party who shows up at my house on Saturday.  However, on Tuesday, I again walk down main street, with my megaphone, and announce a clear revocation of that offer.  In that circumstance, my bike is no longer for sale and I am not bound to sell to anyone who shows up at my house on Saturday with $200.  Why? Because although I made a valid offer, I then revoked the offer before it could be accepted.  On the other hand, if I never revoked the offer and my neighbor shows up at my house on Saturday with $200 cash in hand, asking to purchase my bike, that likely would equate to a valid offer and acceptance and therefore, in the absence of other circumstances, my neighbor could claim the existence of a valid verbal contract.

Please note that there are other elements that must be present to for a valid contract (verbal or written).  Such other required elements include:

  • mutual consent and understanding (each party intends to form a contract and the terms are mutually understood and agreed);
  • mutual performance obligations (each party must be obligated to perform);
  • good faith;
  • consideration (each party is giving something of value or forgoing some right);
  • lack of valid defenses to enforcement (i.e., I am insane when I make the offer, or my neighbor had a gun to my head and forced me to make the offer).

In addition, one who relies on a verbal contract may find that enforcing his or her rights under the same is much more difficult than using a written agreement, as the exact terms of a verbal agreement may be difficult to remember and agree by each party.  Further, if the parties to a verbal agreement end up in court, a judge or jury may have a difficult time knowing who to believe when it comes to claims relating to a verbal agreement.  It is can be straightforward for a court to review the terms of a written agreement, where the basic terms are clear to read and usually fairly easy interpret.  On the other hand, when there is no such written document, and it is the conflicting claims and memory of the parties to a verbal contract which serve as the only source of the agreement, being able to discern, interpret and decide on what the agreement was or was not becomes a much more difficult exercise.

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