How To Protect Yourself When Making an Oral Business Contract in Tennessee

In Tennessee, oral business contracts are way more common than many people realize. Often, business owners finalize deals with a handshake, a casual chat, or a quick phone call, especially if they already know each other. However, while verbal agreements are enforceable in Tennessee, they come with many risks. Without clear documentation, it is easy for misunderstandings to happen. And the reality is that, often, resolving these disputes is tricky.

If you rely on oral business contracts or find yourself entering into one, it is crucial to understand how to protect yourself. Below, we discuss some of the steps you can take to protect yourself when making an oral business contract in Tennessee.

Understand When a Written Contract Is a Must

Not all verbal contracts in Tennessee are enforceable. The Statute of Frauds, found in Tennessee Code Annotated § 29-2-101, requires certain types of contracts to be in writing to be legally enforceable. For example, if an agreement cannot be completed within a year, it must be in writing. Similarly, according to the Uniform Commercial Code, contracts for selling goods worth $500 or more need to be put in writing.

Before you get into an oral contract, make sure you understand which category your business deal falls under so you don’t accidentally enter a verbal agreement that the courts cannot enforce.

Create Written Records Right Away

Even if your contract is verbal, you can protect yourself by keeping a record of the contract terms as soon as possible. After entering an agreement, send an email to the other party summarizing the key points, such as the scope of work, timing, and payment details. Ask the other party to review your summary and confirm if it is correct. Such written confirmations can be vital if a dispute arises.

Perform Partially To Strengthen the Agreement

Partial performance can significantly strengthen the enforceability of a verbal agreement. Partial performance means that you begin to take steps towards fulfilling your end of the deal. This can include delivering goods, making payments, or starting the work. Performing partially can help provide tangible, circumstantial evidence of the contract’s existence. It can help show that both parties understood and accepted the terms of the agreement.

Ensure you keep records of your performance, such as receipts, bank transactions, or email threads. The more evidence you have, the stronger your position will be if a dispute arises.

Document Any Changes or Modifications

If the terms of the agreement change as work progresses, it is a good idea to document the changes in writing. A quick email to the other party acknowledging the change is enough to reduce the risk of a future dispute. Documenting changes can protect you from claims that the original terms are still in effect.

Consider Seeking Legal Advice

Regardless of the size of your deal, it is advisable to consult a Tennessee business and commercial litigation lawyer when getting into an oral contract. A skilled attorney can help ensure you are getting into a legally enforceable agreement.

Contact a Knoxville Business & Commercial Litigation Attorney

Contact our experienced Knoxville business & commercial law attorneys at Reynolds, Atkins, Brezina & Stewart, PLLC for help protecting your business agreements, avoiding costly mistakes, and ensuring your contracts are legally enforceable.

Source:

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