Is an Oral or Handshake Agreement Ever Good Enough?

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For years, you’ve managed your construction business with handshake agreements.  You’ve never had a problem getting paid.  All things considered, it might be because you do superior work and only take on personal referrals.  Notwithstanding, there’s always that one customer.  So, is an oral agreement or handshake ever good enough when it comes to upholding a contract?

The answer is in the first part of this story.  Shaking hands or verbally agreeing to terms can work.  However, the onus is on both parties to do their share.  The contractor has to do the job; the customer needs to pay for it.  However, problems may arise when one of the parties fails to comply with the terms of the agreement.

Oral Agreements and Handshakes: Not Always Binding

Unwritten contracts are okay, provided the parties keep to the terms.  However, the real test is how the courts view an oral or handshake agreement when things go wrong.

First, the type of contract has some relevance when it comes to contracts that are not committed to paper.   In fact, the New Jersey statutes specifically address whether certain promises or agreements are binding unless they are in writing.  Take a look at the language of NJSA 25:1-5, which includes the following:

  • Promises or agreements not binding unless in writing. No action shall be brought upon any of the following agreements or promises, unless the agreement or promise, upon which such action shall be brought or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or by some other person thereunto by him lawfully authorized:
    • An agreement made upon consideration of marriage entered into prior to the effective date of the “Uniform Premarital Agreement Act,” N.J.S.37:2-31 et seq.;
    • A contract, promise, undertaking or commitment to loan money or to grant, extend or renew credit, in an amount greater than $100,000, not primarily for personal, family or household purposes, made by a person engaged in the business of lending or arranging for the lending of money or extending credit. For the purposes of this subsection, a contract, promise, undertaking or commitment to loan money shall include agreements to lease personal property if the lease is primarily a method of financing the obtaining of the property;
    • An agreement by a creditor to forbear from exercising remedies pursuant to a contract, promise, undertaking or commitment which is subject to the provisions of subsection f. of this section; or
    • A promise by one party to a non-marital personal relationship to provide support or other consideration for the other party, either during the course of such relationship or after its termination. For the purposes of this subsection, no such written promise is binding unless it was made with the independent advice of counsel for both parties.

To sum up this portion of the law, some contracts must be in writing in order to be binding.   However, the question remains concerning those not requiring formal written execution.  Can you pursue a claim if you merely shook hands and exchanged some words?

Enforcing Oral Agreements

Understandably, you could be on either part of the deal.  Perhaps you are the unpaid contractor who has completed the job and is looking for payment.  Maybe you are the customer who gave a rather large deposit and is concerned because the construction company has disappeared.

So, are you out of money either way?  Not necessarily.  You will need to meet with an experienced contract lawyer to discuss your claim.  No doubt that the first obstacle you will need to prove is whether the contract actually existed in the first place.

How can you prove something that was part of an oral agreement?  It might be as simple as a canceled check.  If you are a service provider, you should check your receipts for a deposit check.  Similarly, if someone has performed work for you, you should have a copy of moneys you paid up front.

There are more ways to prove the existence of a handshake agreement.  Was someone else a witness to the proposed exchange? You completed the job?  Can you prove it?

In all cases, you should provide your attorney with the circumstances of the agreement to determine the best way to achieve satisfaction.  Additionally, you should also seek legal counsel to draft written contracts for future business deals.

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Have questions regarding any types of contract agreements?  Contact Lawrence M. Centanni to schedule a consultation to discuss your legal issues.

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