With a few limited exceptions oral contracts are enforceable in Tennessee just like a written contract . Of course, a written contract is much easier to prove because there is hard evidence of the agreement. However, an oral contract IS enforceable in most cases. The parties and/or their witnesses can testify about the terms of the agreement, and things such as partial performance or normal course of dealing can serve as powerful circumstantial evidence of the terms of the deal.
A contract is a contract – oral or written – so long as it has the following elements:
- A legal purpose (e.g. Tennessee courts will not enforce a contract between neighbors to illegally use one cable box);
- A mutual agreement that is free from fraud or undue influence;
- Terms that are definite enough to be enforced (e.g. a promise to work for a person’s lifetime would be too vague because a lifetime is not a definite duration); and,
- Adequate value exchanged by both parties (referred to as “consideration” in legal terms).
As noted above, though, there are certain contracts that explicitly need to be in writing under Tennessee law, which is referred to as the Statute of Frauds. In Tennessee, the six types of contracts that must be in writing include contracts for the following:
- Contracts with a term greater than 1 year (i.e. a 2 year lease must be in writing);
- Sale of land/property;
- Executor’s/Administrator’s promise to pay debts of the estate;
- Sale of Goods/Personal Property that costs $500 or more; &
- Suretyship agreements (i.e. a promise to guarantee payment of the debts of another person).
Even after you have successfully navigated all of the above requirements, you should still be careful to file a lawsuit for a violation of an oral contract within 6 years in Tennessee – the same statute of limitation as a written contract. Additionally, you should note that oral contracts often require the testimony of a witness to verify the terms of the agreement.
While oral contracts are enforceable, they should be avoided, if at all possible, simply because written contracts are so much easier to prove and enforce. Contracts can be difficult to navigate, and if you have any doubts when drafting or entering a contract, it is best to consult an experienced attorney. If you need help in negotiations, contract drafting, or even contract disputes, please give us a call.
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