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Oral Contract

DEFINITION

Contract that is not in writing. Is typically unenforceable for real estate transactions.

EXPLANATION

An unenforceable contract is one that violates some law, thus disallowing the contract to be enforceable. A common example of an unenforceable contract is an oral contract wherein one party claims the other party said something. The fact that the contract is not in writing and was claimed to be said through verbal communication likely means the contract is not enforceable

Oral Contract Claims must be made within two years of the date of the incident.

Case Law Relating to Oral Contract

Case Review: Arya Group, Inc. v. Cher (2000)

The case, Arya Group, Inc. v. Cher (2000) 77 Cal.4th 610., involved a dispute between a contractor and the famous musician, Cher.

A contractor (Arya Group) was hired for the construction and design of Cher’s Malibu complex. Arya Group initially had an oral agreement with Cher. It later memorialized the terms in a written contract, but Cher never signed it. However, based on Cher’s words, Arya Group assumed an implied contract and began work.

Cher initially paid installments to Arya Group. She also had Arya Group meet with Janet Bussel, an associate with whom Cher had previously completed residential projects. However, Cher ultimately terminated the contract. She claimed that because she had not signed a written contract, she was therefore not responsible for paying the remainder of Arya Group’s fees. Arya Group sued Cher for breaching the contract.

The Superior Court contended that, on the basis of the statute of frauds, a oral contract was not enforceable. Therefore, it ruled in favor of Cher. Arya Group appealed.

Arya Group alleged that the purpose of the arranged meetings with Bussel was for her to get as much information about the project as possible so that Cher would reap all of the efforts of Arya Group and then terminate the contract. It claimed that Cher was unjustly enriched (whereby a person unfairly benefits from another’s misfortune for which the one enriched has not paid).

The Court of Appeals agreed with Arya Group. It reasoned that although the written contract was not signed, Arya Group did not foreclose his right to enforce the oral agreement. Cher was a sophisticated businesswoman who had the help of professional legal counsel. Therefore, she was held liable for the balance.

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