Is a Verbal Contract Binding in the State of Michigan

Apr 30, 2023 | Muskegon Attorneys

Verbal contracts, also known as oral contracts, are agreements between two or more parties that are not in writing but are agreed upon through spoken communication. These types of contracts are often made in everyday situations, such as purchasing a used car from a private seller or hiring a contractor to work on your home. But is a verbal contract binding?

While verbal contracts can be convenient, they can also be legally binding, and it is important to understand the legality of these types of agreements to avoid potential legal disputes. Here, we’ll discuss how verbal contracts work under Michigan law and the legal considerations involved for them to be enforceable.

Michigan Law on Verbal Contracts

Michigan law recognizes verbal contracts as valid and enforceable, but only if certain conditions are met. To be considered legal, a verbal contract must include the following:

  • Offer. One party extends an offer to another party.
  • Acceptance. The other party accepts the offer.
  • Consideration. Both parties exchange something of value.

For instance, a tenant agrees to pay the monthly rent to the landlord in exchange for the right to occupy the property. In this case, the consideration from the tenant is the monthly rent, while the right to occupy the property is the consideration provided by the landlord. Additionally, the contract must not violate any state or federal laws.

The Michigan Statute of Frauds, however, requires certain contracts to be in writing in order to be legally enforceable in court. These include the following:

  • Contracts for the sale of securities
  • Contracts for the sale of real estate
  • Contracts for the sale of goods over $1,000
  • Contracts that cannot be completed within one year
  • Contracts in which one party assumes the debt of another party

If a verbal contract falls under the conditions stated in the Statute of Frauds, it is not legally binding unless it is in writing and signed by all parties involved. For example, if you agree to buy a car for $2,000 from a private seller and shake hands on the deal, it may be legally binding if there are witnesses or other forms of evidence, such as text messages or emails, to support the agreement. However, if there is no supporting evidence, then it is not enforceable under Michigan law.

Factors Affecting the Legality of Verbal Contracts

Infographic image of factors affecting the legality of verbal contracts

Here are some other key factors that can affect the legality of verbal contracts:

Nature of the Agreement 

Some agreements can be difficult to enforce, especially if the terms are ambiguous or unclear. Verbal contracts with illegal or unethical purposes are also not enforceable.

Parties Involved

A verbal contract is not legally binding if one or both parties lack the capacity to enter into an agreement, such as a minor or someone who is mentally incapacitated. The same applies if one party uses fraud, coercion, or undue influence to induce the other party to enter the contract.

Circumstances Surrounding the Agreement 

The circumstances under which the agreement was made can also affect its legality. For example, if the parties were under the influence of drugs or alcohol at the time of the agreement, the verbal contract is not considered valid and legal. 

Challenges of Proving Verbal Contracts

Proving verbal contracts can be challenging, but it is not impossible. To establish the existence of the contract, it is helpful to gather evidence, document any agreements, and have witnesses present.

Importance of Documentation and Evidence

Unlike a written contract, verbal contracts do not have a physical document that outlines the terms of the agreement. Documenting conversations or agreements in writing is essential to ensure evidence is available later on.

Role of Witnesses and Third Parties

In many cases, witnesses or third parties can provide valuable testimonies to support the existence of a verbal contract. For instance, if the agreement was made in front of other people, they may be able to provide testimony about what was said and agreed upon.

How to Protect Yourself in Verbal Contracts

When entering into a verbal contract, it is important to protect yourself and ensure the agreement is legally binding. Here are some tips to consider:

  • Make sure you clearly understand the terms of the agreement before entering into a verbal contract. Seek legal advice from a qualified Muskegon lawyer to ensure the terms are fair and your interests are protected.
  • Keep records of any conversations or agreements made, including notes or recordings of the discussion.
  • Consider using a third-party mediator to help facilitate the negotiation and ensure that all parties are in agreement.

In addition, it is also worth considering alternative options to verbal contracts, such as written contracts or online platforms that facilitate contract creation and signing. These options can provide additional security and legal protections.

Hiring a Muskegon Lawyer

While verbal contracts can be legally binding in Michigan, it is still best to consult a competent Muskegon lawyer to ensure the agreement is enforceable and protects your best interests, especially if you lack sufficient knowledge of the law.

We at Bowen Law have the finest Muskegon lawyers who can provide you with the necessary legal assistance upon entering into Michigan contractual agreements. Contact us now at (231)-726-4484 or reach us here.

DISCLAIMER:

The information provided on this website does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only.

Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.

If you have legal questions, please contact us at: (231) 726-4484

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Disclaimer:

The information provided on this website does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only.

Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.

If you have legal questions, please contact us at:
(231) 726-4484

Muskegon Business Law Attorneys of David T. Bowen, P.C. pursue cases of Business Law, Real Estate, and Estate Planning in Muskegon Michigan

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