Honesty and the fulfillment of promises remain fundamental cornerstones of both the modern business world and our legal landscape. A contract expresses a basic exchange: You promise to give me something, and in exchange, I promise to give you something else in return.
And so the market and the world of commerce goes around and around. You may not realize it, but every time you make a purchase at your local grocery store, you are making a promise, accepting a promise from the store, thus forming a contract, and then carrying out that contract, all in one swift action.
But more complicated transactions require detailed explanations of the promises being exchanged. Take, for example, when you purchase a house using a mortgage loan. The bank lends you money for the purchase, but the house serves as collateral that the bank may take for repayment of the loan. You make regular payments, including for an agreed interest rate, but the bank must allocate those payments in a prescribed manner toward principal and interest. These exact terms are hard to keep track of, so we need to document them with a written agreement.
With so many details flying about, it can be easy to let your guard down when someone says, “yeah, yeah, we’ll do it exactly as we discussed.” But if you have a written contract, are you sure those details are reflected in that writing? Astonishingly, in a recent case that our firm had against a major commercial institution, a representative of the institution stated that the institution had “no obligation” to carry out its oral promises to its customers!
From a technical standpoint, oral contracts are generally enforceable, but from a practical standpoint, the organization representative had a strong point: Under the statute of frauds, many types of contracts are unenforceable if they're not written down, including real estate contracts. And, especially in a court of law, evidence that’s in writing is far more valuable than a recollection of an oral statement.
So, let me impart to you this valuable wisdom, which we’ve all heard before, but which we should all strive to better accomplish:
If it's important, get it in writing.