RACHAEL PHAIRE

LAW 304

PROFESSOR KELSO

RESEARCH PROJEC

T

4/30/2015

MAMMOTH

SIENNA A

ND MONTANA

ORAL CONTRACT BETWEEN SIENNA AND MONTANAIs the agreement to purchase the snowboard from Montana a

contract?

Sienna agreed to buy the board from Montana. In this case, Sienna was the promisor and Montana was the Promisee. As these two individuals agreed on this verbally there became in privity of the contract. Meaning, based on their verbal agreement, sometimes the parties are in agreement, but their agreement doesn’t produce a contract. This means this is equivalent to a preliminary agreement but they never made a contract document. It could also mean that it is just a future plan without and contractual obligation to carry out those plans or intentions. Sienna portrays this in her mind, as Montana thinks of this as more of a preliminary agreement. In other words this is an Oral Contract between the two friends.

ORAL CONTRACT CONTINUED• Although this is an Oral Contract, are there any other laws

or stipulations that apply? • The answer is yes. According to the sale of goods under the

UCC, If the item is under 500$ in a contract there is no law that states there need be a written contract.

• Statutes of Frauds also applies to this situation. This is how, The Statute of Frauds is a collective term describing the various statutory provisions which render unenforceable certain types of contracts unless they are evidenced by a writing. The Statute of Frauds does not mean that oral agreements within the scope of the Statute cannot be made and performed or that they are illegal. It simply means that enforcement may be unavailable if one of the parties refuses to fulfill their obligations.

WHAT IS AN ORAL CONTRACT?Oral Contract-

an agreement made with spoken words and either no writing or only partially written. An oral contract is just as valid as a written agreement. The main problem with oral contracts is proving its existence or the terms. As one people have observed: "An oral contract is as good as the paper it's written on." An oral contract is often provable by action taken by one or both parties which is obviously in reliance on the existence of a contract.

EXAMPLES OF AN ORAL CONTRACT• Winternitz v. Summit Hills Joint Venture, 73 Md. App. 16, 532 A.2d 1089 (1987),

cert. denied, 312 Md. 127, 538 A.2d 778 (1988).Winternitz (P) operated a pharmacy and convenience store under a lease from Summit Hills

Joint Venture (D). Before the lease expired, Winternitz discussed a renewal of the lease with a partner in Summit Hills Joint Venture. P informed him that he was considering selling his business and asked if he would be permitted to assign his lease to the buyer. P claimed that D orally agreed to renew the lease and permit him to assign it provided the assignee was financially sound.

P received an offer of $ 70,000 for his business with the purchaser to assume the lease on the premises for two years at $ 1,700 per month plus an option for 8 yrs at rent plus CPI not to exceed 12% per yr. The contract was contingent on the buyer procuring the lease. The new buyer was told by Ms. Harris, that she ‘foresaw no foreseeable problem’ with a transfer of the lease and P was assured that “as far as I know everything is okay.”

D later refused to allow P to assign his lease or to renew it. P was forced to renegotiate his sales contract in light of the terms of the new buyer’s lease and received only $15,000 rather than the original $70,000.

P sued D alleging that D breached both oral agreements causing his business to suffer a significant decrease in value. The jury awarded P $45,000. The court granted judgment N.O.V. in favor of D and P appealed.

RULES OF ORAL CONTRACTS

Usually, oral contracts are enforceable. However, the statute of frauds requires that five kinds of contracts be put in writing in order to be enforceable. If a contract falls into one of these five categories, the contract is “within the statute” and must be in writing. If the contract does not fall into one of these five categories, the contract is “outside the statute” and does not need to be in writing. The five categories of contracts that must be written down in order to satisfy the statute of frauds are: 1) contracts for the sale of an interest in land,2) contracts for the sale of goods for $500 or more (under the U.C.C.), 3) contracts in consideration of marriage, 4) contracts that cannot be performed within one year of the contract being made and,5) contracts of surevyship.

The rule stating that where a person guarantees the debt of another person in order tosatisfy his own personal interests, that guarantee is enforceable even if it is not in writing.

EXAMPLES OF CREATING AN ORAL CONTRACT• Two individuals make a deal to trade guitars. Person A says,

“ I am about to buy a new guitar and sell this one on craigslist for 450.” Person B says, “ Wait, I really like the guitar. I’m your best dude, you should just sell it to me for 350 and I will buy it for sure.”

• Person A says, “ Ok, deal.” Some time passes and Person A finally gets the brand new amazing guitar that he has been wanting. Person B comes over to his house and sees the old guitar. Person A says, “ Are you ready to give me the 350$ for this guitar?” Person B says you know what I changed my mind dude.

• Person A is furious because he could have gotten 100$ more on craigslist and it was a guaranteed sale. Is person B responsible for paying Person A the extra 100$ and taking the guitar?

ANSWER TO EXAMPLEThe answer is no. Person B is not responsible for the payment

of the guitar or the extra 100$. There was no contract between the two friends that stated he would purchase the guitar period. Since the price was under 500$, and there was no written signature or statement, there is no legal ground to stand on for person A.

It is a disappointing fact, but since there was no binding agreement, it was simply an oral contract or “handshake” between two friends. Person B may have seemed like a great friend who always has Person A’s back, but clearly that is not the case in this matter.

Person A trusted his friends word and it was sadly misjudged on his part.

WHY ORAL CONTRACTS ARE USEDThe only way that this situation could have been avoided would

be if a witness say the conversation take place, or physical evidence was shown in a legal setting.

What situations Oral contracts should be used in: When the other party asks for an oral contract only.

When the agreement is too complicated to be written in text.Neither person has the time to sit down and write their wants

down on paperBoth parties trust one another. The issue with trusting is,

Contracts and the law In general is not about trusting the other person, but it is about having everything clarified. When there is mistrust over those expectations then issues arise.

ANALYSIS• Person A offered to buy the board off of Person B. Verbally,

there was an oral agreement which equates to an Oral contract. If this case were tried in a court of law, you would be able to prove it in court. Many individuals in general have engaged in “handshake deals” or oral contracts. Where issues may arise is where you shook on an oral contract, but no one witnessed it. It would benefit the individual to start pulling their weight on their end of the deal.

• Failing witness testimony or any actions that would verify your handshake deal, you can always present supporting materials to strengthen your claim.

• EX. Correspondence between two parties is admissible in court, especially if it is sent certified mail. As well as faxes, emails, letters, memos, and receipts all help prove your handshake deal in court.

ANALYSIS CONTINUED• Although handshake deals work, they more often than not

fall apart due to the details of the agreements. • Oral contracts are more acceptable for simple small

exchanges like “ I will trade you my almost new hair straightener once I buy a newer one.”

• For things such as leases, employment, cars, etc it is better to get those kinds of things In writing. In order to mitigate any issues that arise.

• Sienna and Montana spoke about the payment and swop before it took place, but as we can see nothing transpired.

CONCLUSIONSienna and Montana agreed that in a few months time, Sienna

would buy the board off of Montana. Montana offered the board to her for 300$. With that being said Sienna agreed to the verbal contract “handshake”. Once the time came to pay up for the board that was promised to her, she responded with, “what sale?” Montana reminded her friend of the conversation that took place amongst them months earlier. Sienna acted as if she was just admiring the board.

Sienna should have told her friend that when the original conversation took place. In order to save herself money, she made up that piece of the story to get out of purchasing the board. Since the board was under 500$ and in most states the cost of the item is required to deem it enforceable under the STATUTE OF FRAUDS, there is nothing much Montana can do. All she can do is try to sell the board to another individual and be weary of Sienna’s word for the future.

REFERENCES-APA References1. Oral Contracts: Do they carry any weight?(2009, Dec) Karen T. Hartline

https://www.legalzoom.com/articles/oral-contracts-do-they-carry-any-weight

 2. When is a written contract required under the UCC? Diana Fitzpatrick,

J.D.http://www.nolo.com/legal-encyclopedia/when-is-written-contract-required-under-the-ucc.html

 3. The Statute of frauds(2003-2015)National Paralegal Collegehttp://nationalparalegal.edu/public_documents/courseware_asp_files/contracts/DefensesToFormation/StatuteOfFrauds.asp 4. Oral Contracts(2015)Peter Clarkehttp://www.legalmatch.com/law-library/article/oral-contracts.html