Are Oral Business Contracts Enforceable in Tennessee?
While most people enter into written contracts, sometimes business owners get into oral agreements. It is quite normal to make quick business deals over a phone call or during a meeting, especially with people you’ve known for a long time and trust. But when a conflict arises, you might start to wonder if an oral agreement can actually stand up in court. In other words, you might ask, “Are oral business contracts enforceable in Tennessee?” In Tennessee, contracts can be written or oral. There are only a few situations detailed under the law when you cannot enter into an oral contract. However, written contracts are highly advisable as they are easier to prove.
What Makes a Verbal Contract Enforceable in Tennessee?
According to Tennessee law, a contract is only considered valid if the following elements exist;
- Offer and Acceptance: One party made a clear offer, and the other party agreed to those terms.
- Mutual Intent/Consent: Both parties intended to create a legally binding relationship.
- Consideration: Something of value, like money, goods, or services, was exchanged between the parties.
- Legality: The agreement involves only legal activities.
If each element exists, an oral contract can be enforced in Tennessee just like a written one.
When Must a Contract be in Writing?
Although Tennessee allows oral business contracts, the Statute of Frauds mandates that certain contracts must be in writing. If a contract listed under the statute is not in writing, it cannot be enforced. Under Tennessee Code Annotated section 29-2-101, here are some of the contracts that must be in writing to be legally enforceable;
- Agreements that cannot be performed within one year
- Promises to pay another person’s debt
- Contracts for the sale of land or real estate
Additionally, under the Uniform Commercial Code, contracts for the sale of goods over $500 must also always be in writing.
The Challenges of Proving and Enforcing Oral Contracts
While you can legally enter into an oral contract in Tennessee, it is vital to keep in mind that proving and enforcing an oral contract can be difficult since there is no written record of the agreement. Often, it comes down to your word against the other party’s word. You will need clear and convincing evidence of the contract’s terms and the intentions of both parties. Evidence you can use to prove and enforce an oral contract includes;
- Communications between you and the other party, such as emails and text messages
- Invoices, receipts, or partial payments showing one party performed their end of the deal
- Testimony from anyone who saw or heard the agreement being made
- Conduct of the parties, such as delivering goods as per the agreement
Common Disputes Involving Oral Business Contracts
Here are some of the common types of disputes that arise when a business enters into an oral contract with another party;
- Unpaid goods or services
- Non-performance
- Disagreements over the scope of work
- Partnership disagreements, such as disagreements on profit sharing or responsibilities
Since there is no paperwork, resolving such conflicts can be complicated, lengthy, and costly.
Although oral business contracts can be enforced in Tennessee, the best way to protect your business is by getting into written agreements. Written contracts leave little or no room for misunderstandings.
Contact Us for Legal Help
Contact our skilled Knoxville Contract Drafting Attorney at Reynolds, Atkins, Brezina & Stewart, PLLC for help ensuring your contracts are clear, compliant, and enforceable under Tennessee law.
Source:
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