Are Oral Business Agreements Enforceable?

Can a Contract Be Voided Because It’s Not in Writing?

In the business world, much is done conversationally. You may talk with vendors and suppliers on the phone, or stop by a customer’s place of business to discuss your products. What happens if you verbally agree to the sale or purchase of goods or services but the terms of that oral discussion are never put in writing? Can the agreement be enforced in a court of law? The answer—it depends…

The Statute of Frauds

As a general rule, oral contracts are enforceable, provided the requirements of a valid and enforceable contract are met. There are, however, certain situations where a contract is enforceable only if it is in writing. Those situations are listed in a written law known as the Statute of Frauds.

Under the provisions of the New Jersey Statute of Frauds, the following oral contracts are not enforceable:

• Any contract involving an interest in land or real property, including sales, leases for three years or longer, easements, and restrictive covenants;
• Any loan, grant, or extension of credit where the principal amount exceeds $100,000 and the person/entity making the loan/grant/extension of credit is in the business of doing so;
• A guaranty or suretyship agreement, where one party agrees to be responsible for the financial obligations of another person;
• An agreement by a creditor not to exercise a contractual right or remedy when the amount owed is in excess of $100,000; and
• Prenuptial agreements.

A number of statutes other than the Statute of Frauds also mandate written agreements:

• New Jersey’s Uniform Commercial Code requires that certain contracts for the sale of goods must be in writing.
• The New Jersey Consumer Fraud Act requires that contracts involving certain industries —home improvement, health clubs, employment agencies, and automotive sales—must also be in writing.

Contact Attorney Howard N. Sobel

At the office of Howard N. Sobel, we provide comprehensive contracts counsel to businesses and business owners. Contact our office online or call us at 856-424-6400 to set up a free initial consultation (on selected cases). We are currently available by phone, text message, or videoconference only. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.

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