Oral Contracts and When Written Contracts
are Necessary

legal information on written and oral contracts
  1. An oral agreement is binding on the parties in the absence of the applicability of the statute of frauds (see below). However, where the parties fail to memorialize their agreement in writing, this increases the likelihood that disputes may arise in the future (and ultimately, litigation) as to the terms, scope and interpretation of the contract. Without a formal document, it is much easier for the parties to enter the contract with fundamental disagreements about what was intended, what were the objectives etc.
  2. Under California law, the statute of frauds requires that certain types of contracts be supported by a writing if they are to be enforceable. The statute provides only a defense, and cannot be used to enforce an agreement. Agreements governed by the statute of frauds include:
    1. Agreements incapable of performance within one year.
    2. Certain agreements relating to the purchase, sale or lease of real property.
    3. Agreements incapable of performance during the lifetime of the promisor.
    4. Suretyship agreements (e.g. promise to a creditor to meet the obligations of another).
    5. Certain agreements to make a consumer loan in excess of $100,000.00.
    6. Certain agreements for the assumption of indebtedness secured by a deed of trust on property purchased.
    7. Certain modification agreements.
    8. Certain agreements for the sale of goods in excess of $500, and certain agreements for the sale of personal property in excess of $5,000.
    9. Letters of credit.
    10. Authorization of another to enter into an agreement that must be in writing.
    11. Certain equipment leases.
    12. Agreements to pay the debts or liabilities of a decedent from one’s own estate.
    13. A trust in relation to real property.
    14. Premarital agreements.

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