Oral Agreements Are a Risk Management Nightmare!

One of the best (and most affordable) risk management tools available is the clear, concise, written business agreement.

 

What’s not to like about oral (i.e., unwritten) agreements?  Let us count the ways:

 

1. Unenforceability. Some aren’t even legally enforceable, such as agreements for the purchase of real estate.

 

2. Shortened Enforcement Periods. Even if the agreement is for an enforceable subject, you may have less time to file suit than you do over a written one.  Breach of contract lawsuits must be filed within a specific number of years from the date of the breach.  That’s called a Statute of Limitations. Almost half of the states in the USA have shorter Statutes for oral agreements.

 

We think that actually makes sense.  Unaided human memories do fade!

 

3. Expensive Proof Problems. Oral agreements almost by definition are harder to prove than are written ones. If there is a writing signed by both parties, you won’t need to spend a lot of courtroom time (read: legal fees) proving what the agreement was.  If there’s no signed writing, you could wind up spending forever (did we mention legal fees?) just bringing in witnesses and counter-witnesses to testify over what the agreement was or wasn’t.

 

4. Risk of Incorrect Performance. Each human being has a unique perspective. It is perfectly normal for two people in a negotiation to have different understandings of what they just agreed to do.  If they take the time to reduce it to writing right away, they minimize the risk that each one will head off in a different direction when it comes time to perform the contract.

 

5. Relational Harm. Because humans have unique perspectives and memories that do fade, it shouldn’t come as a surprise that honest, honorable people will have radically different recollections of what they thought the deal was. If these differences don’t surface until there is a dispute, there is a big risk that their relationship will be irreparably damaged.

 

Would you like to learn more about that risk management tool mentioned above?  Please see our post Using a Sales Contract that Speeds up Getting to Yes

Thank you!

 

Stuart Blake

Mobile – (949) 842-9379

sblake@innovacounsel.com

 

Michael Oswald

Mobile – 208.914.3086

moswald@innovacounsel.com

 

www.innovacounsel.com

 

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