Question: As a general rule, most business contracts should be in writing even when they fall outside the Statute of Frauds. Businesspersons frequently make oral contracts over the telephone, however, particularly when the parties have done business with each other in the past. Confirm the Agreement in Writing Any time an oral contract is made, it is advisable for one of the parties to send either a written memorandum or a confirmation of the oral agreement by fax or e-mail to the other party. This accomplishes two purposes:
(1) it demonstrates the party's clear intention to form a contract, and
(2) it provides the terms of the contract as that party understood them.
If the party receiving the memorandum or confirmation then disagrees with the terms as described, the issue can be addressed before performance begins. Special Rules for Contracts between Merchants What about the sale of goods between merchants? Under the UCC, written confirmation received by one merchant removes the Statute of Frauds requirement of a writing unless the merchant receiving the confirmation objects in writing within ten days of its receipt. This law clearly points out the need for the merchant receiving the confirmation to review it carefully to ascertain that the confirmation conforms to the oral contract. If the writing does not so conform, the merchant can object in writing (the Statute of Frauds still applies), and the parties can resolve misunderstandings without legal liability. If the merchant fails to object, the written confirmation can be used as evidence to prove the terms of the oral contract. Note, however, that this ten-day rule does not apply to contracts for interests in realty or for services, to which the UCC does not apply. A How Can You Prevent Problems with Oral Contracts?* * This Application is not meant to substitute for the services of an attorney who is licensed to practice law in your state.
CHECKLIST FOR THE BUSINESSPERSON
1 When feasible, use written contracts.
2 If you enter into an oral contract over the telephone, fax or e-mail a written confirmation outlining your understanding of the oral contract.
3 If you receive the other party's written or faxed confirmation, read it carefully to make sure that it states the terms already agreed to in the oral contract, as you understand them.
4 If you have any objections, notify the other party of these objections, in writing, within ten days.