Our business clients often ask if all contracts under Utah law have to be in writing. From a legal perspective, a contract is made when one party makes a valid offer and another party accepts that offer, and that can often be done verbally. However, Utah law requires that some types of agreements must be in writing. Furthermore, even if an oral contract is valid, that doesn’t mean it is as good as a written contract.
Contracts Required to be in Writing
Under Utah Code Section 25-5 and 70A-2-201, various types of agreements are required to be in writing in order for them to be enforceable contracts. This law is known as the “statute of frauds,” because it governs important agreements for which a written agreement should be made to help avoid fraudulent claims. These include:les of real estate
- Contracts that, by their terms, can’t be completed in less than a year
- Contracts where a party becomes a guarantor for another party; i.e., agreements to pay debts of the other party
- Credit agreements
- Agreements for a real estate agent to sell real estate
- Contacts for the sale of goods at a price of over $500
- Real estate leases that last longer than a year
- Contracts that have marriage as the consideration; i.e., prenuptial agreements
- Agreements where the executor of a will agrees to pay debts of the estate with the executor’s own money
Exceptions
There are some exceptions to the statute of fraud, and with these, oral contracts might be enforced by a court even for the above types of agreements. Courts can enforce a variety of exceptions. Among many others, these can include 1. If a party admits the contract exists; 2. Partial performance of the contract; and 3. Written confirmation of the sale of goods over $500.
However, these exceptions are at best a stopgap for a party trying to enforce an oral agreement. In addition, oral agreements, even if enforceable, are notorious for creating disputes between the parties. Since there is often no evidence of what the terms were supposed to be, the parties may have very different understandings or recollections of what the agreement really is. This sometimes is because one party is not acting in good faith (which is very hard to prove), but even worse, it is much more often because the parties really didn’t have a clear understanding of what the agreement was in the first place, and so both believe that they are in the right. This situation is often behind the most contentious litigation and disputation since both parties feel they have the moral high ground.
Written Agreements
It is far better to have an agreement in writing. A written agreement can set out the terms of the deal more clearly than any oral agreement and ensure that both parties understand their rights and obligations under the agreement. In addition to being far more likely to be enforced by a court, a written agreement helps avoid disputes in the first place since both parties have more clarity, from the beginning, as to what the other side thinks the contract is. If the parties have different understandings of key points of the deal, it is far better to know, and resolve, this at the beginning instead of fighting it later on.
In a written agreement, it is important to ensure that the terms set out are enforceable by Utah courts. Some types of agreements, and terms, must be structured carefully and correctly. A few of the most critical items to watch out for are the following:
- Ensure the correct parties are properly identified and execute the document, especially if an entity is involved
- Ensure that an entity is properly referenced and its officer is proper
- Clarify what the agreement is about
- Each key term should have its own section and discussion
- Ensure that none of the provisions are against Utah law
It is easy to check with an attorney prior to entering into an agreement to make sure that you are covered, and it’s much less costly to do so than to try to enforce an oral or poorly drafted written contract once problems have occurred. Breaching a contract creates the potential for major disputes, as does an agreement that you thought was enforceable but turns out not to be.
Enlist a Utah Business Attorney
Our deep Utah business law knowledge can help you with any of your contracts, agreements, and other operational requirements. Whether you are seeking to draft agreements, figure out what terms are best for a potential contract, or think about how to structure your next deal, we have likely seen your issues many times before. We are available to discuss your options and answer your questions at an initial free, thirty-minute consultation.
Call us at (801) 477-6838 for a free consultation. You can also email Ben at benjamin.beasley@freemanlovell.com, fill out a contact form below, or set up an appointment to meet at our offices. We look forward to helping you.
