Is an Oral Contract Enforceable in California?

Despite the fact that it remains the better and safer practice to put all contracts in writing, many important business and partnership agreements are still made orally. While oral contracts are enforceable in California in many circumstances, the California Civil Code specifically requires that certain agreements be put in writing to be enforceable.

Specifically, California law requires that the following contracts be in writing in order to be enforced:

• A contract in which performance will necessarily exceed one (1) year after the signing of the agreement.
• A contract in which performance is not scheduled during the promisor’s lifetime.
• A contract containing a special promise to pay for the debt or default of another.
• A leasing contract where the lease term is over one (1) year.
• A contract for the sale of real property.
• A contract authorizing or employing an agent, broker, or any other person to purchase or sell real estate, or to lease real estate for a period than one (1) year.
• A contract to loan money or extend credit in an amount greater than $100,000 that is not primarily for personal, family, or household purposes and is made by a person engaged in the business of lending or arranging for the lending of money or extending credit.

There are some exceptions to these requirements, such as the fraudulent inducement by one contracting party who causes another to agree not to have a written contract for an agreement that is normally required to be in writing. In such a case the oral agreement may be enforced.

If you are concerned about the enforcement of an existing verbal agreement, keep in mind that California Courts are inclined to enforce contracts if they feel that one of the parties somehow used fraud to induce another person to rely on a promise. Still, a written contract is always recommended, especially considering the potential costs associated with efforts to enforce a verbal agreement in court.

Ezer Williamson provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your business law concerns.