Are verbal agreements valid contracts?

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10/28/2014 | Author: Editorial Staff

My seller received a written offer to purchase his property. Instead of countering the offer in writing, the parties engaged in verbal negotiations that resulted in a verbal agreement on new terms. Before the buyer’s broker submitted an updated offer with those terms included, my seller received a written offer from another potential buyer that he chose to accept. Now, the first buyer is threatening to sue my client for breach of contract because of their verbal agreement. Is the verbal agreement enforceable?

No. A verbal agreement must be reduced to writing and signed by the buyer and seller to become valid. Since a contract was never created, nor signed, there is nothing for the buyer to enforce. While verbal negotiations of contracts can be a quicker way to reach an agreement, verbal agreements are not enforceable for the sale of real property.

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Categories: Legal
Tags: legal faq, verbal agreements, contracts


Comments

Julian on 08/25/2016

Hello, I find myself in a situation where I need some real help and need to know my options. Any help you can give would be much appreciated.
About 11 years ago, my uncle received a settlement which he used to buy his house and a house for my mother and brother. My uncle gave this house to them as a gift with the verbal agreement that this home belongs to them and that they would only have to pay for taxes and insurance on the home. My uncle was keeping the house in his name for tax purposes but does have a will that states that the house is to be transferred to them upon his death.
My brother is now disabled due to M.S. and my mother took an early retirement in order to take care of him, but even with this they have not skipped a beat taking care of their obligations. I moved in here about 6 years ago to help them out due to my brother’s inability to do certain things physically. Everything that has been done to this house since they accepted this gift was done and paid for by us and the insurance my uncle has on this house that they were paying for. Now, 3 years ago the roof was replaced, we gave the additional money to my uncle for the deductible, and the insurance company said that there were too many things wrong with the house and decided to drop the policy. We then entered into a new verbal agreement with my uncle that the additional money we were paying beyond the taxes (an average of $300/month) would be put into a separate account that would only be used to make repairs to this home. To date we have accumulated over $10,000 in that account. We have always paid for our own upgrades such as the garage door, the water heater, garbage disposal, fences, ceiling fans, stove, refrigerator, etc. Due to the horrible plumbing in this neighborhood, my brother and I decided to buy an auger so that we could do our own work clearing the line since it happens so often. The auger has already paid for itself several times over by saving us thousand in plumber visits.
Now, here we are at the present (2016) and the roof that was replaced by the contractor that my uncle and his wife use now has to be replaced as there is a hole in it again and water is leaking through. The contactor stated that it was due to an act of God (hail damage) and was therefore not covered under warranty so the whole roof has to be replaced again. My uncle’s wife, who handles all their finances, said that if the roof was replaced and repairs were made to the house that they would have to sell the house in order to make their money back. When we asked where all the money went that was supposed to be set aside for repairs on this house, she could not give an answer, but we do know that repairs were recently made to their own home.
We are now in the process of being evicted from the home that we were gifted and which we have spent so much time and money on. A few days before all this happened my uncle sat down with us and said that he had wanted to give my mother and brother the house outright at the beginning. It was my aunt that had wanted to hold onto the house “for tax purposes”. He has always stated that the house was in his name alone so that she could never do to us exactly what is being done now. My mother even sold the home that she owned outright in order to move into this one based on their word that this house was gifted to them and theirs to do with as they like.
Please tell me what recourse we have. Any assistance would be greatly appreciated.

Thank you,

Julian

Steve Young on 10/29/2014

Hey Tim, great news and I sure do agree with your comment on keeping up on the most current issues as all this is a very good example!

Thank you for sharing,

Tim Brown on 10/29/2014

Thanks for the link - I did bring that up, and now the other offer is a “backup” to ours! I get that we need to do the best for our clients, but care must be taken to “do the right things” with fellow agents as well! I know TAR and others do a good job of getting updates out, but agents need to read and take update courses to stay abreast of what the latest trends are, not just in carpet, but in law!

Steve Young on 10/29/2014

Thank you for that. I knew there was another article I had read but couldn’t remember where! http://texasrealtor.epubxp.com/i/118008/25

Editorial Staff on 10/29/2014

@Tim and @Steve: Check out what TAR legal staff has to say about electronic communication and contracts in “Can an email be a legal contract?” from Texas REALTOR magazine: http://texasrealtor.epubxp.com/i/118008/25

Tim Brown on 10/28/2014

Just had similar situation. After initial offer, negotiated via email. Listing agent last email stated “we have a deal” and we replied that updated changes would be sent first thing next morning. Changes provided, we asked when it would be at title and listing agent told me…we recieved another offer, they know about yours and will present to seller this evening. All in email chains, so not just verbal. By the way clients were both local and partner in Germany, had to rely on electronic signatures, time zone differences, my position is we had a contract per written communication and validation. Right or wrong?

Steve Young on 10/28/2014

Completely agree since it does not state any emails or other forms of electronic transactions went along with the “verbal” negotiations but, what if there had been emails back and forth as so many of us do to help save time and also have a record to protect us and our client? I bring this up in light of several case studies I’ve seen regarding the laws on this type of negotiating and are these binding. Not trying to be negative but it is something to keep in the back of our mind when negotiations go back and forth.

A good read is from the October 2014 Tierra Grande magazine article titled “Electronic Transactions”.


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