In business, it is not always feasible or practical to get all agreements in writing. When running a business, dealing with the vendors, suppliers and even business partners can mean that some agreements are reached and promises made based on just a handshake. But what happens when one party breaches the oral agreement? Is the oral agreement an enforceable contract? As with many things in the law, it depends.
In Georgia, some oral agreements are enforceable contracts, but the analysis can get complicated.
O.C.G.A. § 13-5-30 outlines certain agreements that must be in writing to be enforceable. This law is commonly referred to as the Statute of Frauds.
Specifically, agreements dealing with the following must be in writing:
(1) A third party agrees to pay the debt owed by another person (for example; if you hire a vendor in order to provide services to your client and your client agrees to pay the vendor instead of you, the vendor could not sue your client for failure to pay without a written agreement. The debt is owed by you and your client is the third party);
(2) Any contract for the sale or lease of real property;
(3) Any agreement that cannot be performed within one year (for example; a contract to provide services for more than 12 months);
(4) Any promise to revive a debt barred by a statute of limitation; and
(5) Any commitment to lend money.
With that being said, O.C.G.A. § 13-5-31 provides a loophole to the Statute of Frauds that allows the oral agreement to become enforceable when it otherwise would not be. Specifically, the statute states:
The provisions of Code Section 13-5-30 do not extend to the following cases:
(1) When the contract has been fully executed;
(2) Where there has been performance on one side, accepted by the other in accordance with the contract;
(3) Where there has been such part performance of the contract as would render it a fraud of the party refusing to comply if the court did not compel a performance.
If ALL three provisions apply to the oral agreement then it may still be enforceable.
The enforcement of oral business contracts can become complex depending on the facts and circumstances. It is always best to get all of your agreements in writing; however, if you have entered into an oral agreement and need to know how to enforce it, or if you are having other issues related to an oral business agreement, contact Business Law Attorney, Michael S. Burnett at 678-905-4450 Ext. 3. www.msb-law.com/ MICHAEL S. BURNETT, LLC.