IS A VERBAL CONTRACT ENFORCEABLE?

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One often hears the humorous expression, “An oral contract is not worth the paper it’s written on.” But must all contracts be in writing in order to be enforceable?

An Idaho statute deals with this precise question. Idaho Code Section 9-505 provides that the following types of contracts must be in writing to be enforceable:

1. An agreement that by its terms is not to be performed within a year from the making thereof.
2. A special promise to answer for the debt, default or miscarriage of another, except in the cases provided for in section 9-506, Idaho Code.
3. An agreement made upon consideration of marriage, other than a mutual promise to marry.
4. An agreement for the leasing, for a longer period than one year, or for the sale, of real property [land], or of an interest therein, and such agreement, if made by an agent of the party sought to be charged, is invalid, unless the authority of the agent be in writing, subscribed by the party sought to be charged.
5. A promise or commitment to lend money or to grant or extend credit in an original principal amount of fifty thousand dollars ($50,000) or more, made by a person or entity engaged in the business of lending money or extending credit.

Contracts not listed above may be enforceable if they are not in writing. Moreover, there are exceptions to the five listed categories of contracts which must be in writing. For example, if there has been “part performance” by one of the parties to the contract, it may be enforceable even if it was only an oral contract. Take the case of a person who foolishly loans a friend $60,000 without any written contract or memorandum. If the friend refuses to repay the $60,000, a successful civil lawsuit can still be filed to collect the money because there was “part performance” of the contract by the person who loaned the money.

It is wise to obtain the services of an experienced attorney when entering into contracts involving a significant amount of money, time or other resources.