Is an Oral Contract Ever Worth Anything?

There is a saying floating around: “A verbal contract isn’t worth the paper it’s written on.”

While there are times when a verbal contract can be enforced, certain contracts in North Carolina MUST be in writing, pursuant to something called the Statute of Frauds:

• Goods for the price of $500 or more (this is an old statute), unless the goods are specially manufactured, the goods are prepaid, or the party being sued admits there is a contract.

• Contracts that cannot be performed in one year.

• Agreements to pay the debt of another (a guaranty by the business owner to pay the debt of the company).

• An agreement to pay a debt that was discharged in bankruptcy.

• Commercial loan commitments in excess of $50,000.

• Contracts regarding real estate transactions, including leasing or purchasing.

You will notice that service contracts do not have to be in writing.

Although verbal contracts can be enforced in some instances, relying on them is a bad idea. Written contracts help clarify what the terms of the agreement are, make sure both sides have agreed to the terms, and give legal protection in case one party doesn’t live up to its obligations.