David H. Schwartz
Which Contracts Are Enforceable in California?
When someone breaches a contract they’ve entered into with you, it’s important that you act quickly. In many cases, simply reminding the other party of the terms of your agreement can be enough to get things back on track. In others, you may need to take legal action in order to successfully enforce the original deal.
But two questions remain: Is your particular contract enforceable? And will a court find that it has been breached?
Every contract is unique, so the best way to get clear answers to those questions is, of course, to discuss your situation with an experienced local attorney. That being said, the remainder of this article can at least help you determine whether your contract is likely to be enforceable should you decide to pursue legal action.
California Contract Law: Written vs. Oral Agreements
When it comes to any kind of agreement, you’ve undoubtedly heard the golden rule: get it in writing. The reason for this rule is simple. Written contracts are tangible evidence that not only did an agreement take place, but also evidence of each party knowingly signing on to fulfill a specified set of terms. With such a document in place, it becomes much more difficult for either party to deny their obligations in the event that the other party claims breach of contract. If the parties did not use a lawyer to draft their written agreement, they may have inadvertently signed off on an agreement with different terms than they intended. If a form contract was used, they may have agreed to terms without knowing what they were agreeing to.
Oral contracts are enforceable in California. However, unlike in the case of a written contract, the terms of the contract must be proven by oral testimony, and, surprise!, the parties to an oral agreement frequently disagree as to what terms were agreed to. Even though the parties agreed orally, the terms of their agreement may be evidenced by a written record, such as email exchanges that discuss the oral agreement terms. An exchange of written or email correspondence even may be sufficient to find the existence of a written contract.
An enforceable contract may also be found by implication or evidence of the practice of the parties.
However, California law requires certain types of agreements must be in writing to be enforceable. For instance, contracts where performance cannot be completed in one year and any agreement for the transfer of title to real estate are required to be in writing.
Obtaining Relief Through Non-Contract Remedies
Despite the restrictions on enforcing contracts, in many instances other legal theories may provide a route to obtaining relief. For example, people sometimes give money to another person who uses the money to purchase real estate, with an oral agreement or understanding that the person providing the money will be an owner or otherwise benefit from the real estate purchase. The other party uses the money to buy real estate, but records title in his or her name only. Although there is no written agreement that says that the person who gave the money is to be a title holder to the real estate, the Courts will fashion a remedy to provide relief to the defrauded funder.
Another non-contract remedy is called “promissory estoppel.” This is where one party makes a unilateral promise knowing that the other party is going to rely to her detriment on that promise. Although the first party is getting nothing in return for the promise, so there is no mutuality of consideration necessary to form a contract, the Courts will enforce the promise if the elements of promissory estoppel are shown.
One common situation where promissory estoppel can be applied is where a prospective employer offers to employ someone and the future employee tells the employer he will be quitting his current job and moving to a new location in reliance on the employment offer. Assuming the employment offered is “at will,” the employer has no obligation under contract law to go through with the promise of employment, or the employer could fire the prospective employee shortly after the employee is hired. There is no enforceable employment agreement, but because the employer knew that the prospective employee was quitting their previous job and incurring the expense of moving, they may be “estopped” to deny responsibility for the prospective employee’s losses.
Some Contacts Are More Enforceable Than Others
Not all contracts are created equal. Whether or not each one can be readily enforced depends on a number of factors, such as how much time has passed since the agreement was violated, whether the type of contract you entered into is “disfavored” by local law, and how clearly the contract’s terms were laid out in the first place. Let’s dive into each of these considerations more fully as they apply to California law.
Time Limits for California Contracts
A contract’s statute of limitations refers to the amount of time you have to file a lawsuit from the date the breach of contract occurred. In California, the statute of limitations for written contracts is four years, whereas it’s only two years for oral contracts.
Two to four years may sound like a lot of time, but the lawsuit filing process isn’t instantaneous. If you think you may have a case, act quickly to ensure you have the time you need.
Favored vs. Disfavored Contracts in California
It is worth noting that California tends to favor contracts that promote fair competition while generally disfavoring those that promote unfair competition. This trend is especially important for employers and business owners so they don’t enter into certain agreements lightly.
For instance, if you have an employee who violates a non-disclosure agreement, chances are good that you’ll be able to enforce the terms of your contract — whatever the penalty for that violation may be.
On the other hand, non-compete agreements are enforceable only in strictly defined circumstances. California public policy disfavors non-compete agreements. This makes California different from a number of other states that have few or no restrictions on employers imposing post-employment non-compete provisions on their employees.
General Contract Quality
Last but not least, a contract’s quality and clarity are going to make a substantial difference in whether or not you can enforce its terms. If the terms are vague or poorly constructed, each party is going to interpret the deal differently.
Should you decide to file a lawsuit, your victory will largely depend on your attorney’s ability to convince the court that your interpretation is correct and was understood between both parties at the time the deal was made.
San Francisco Contract Enforcement Services
If you need legal representation on a contract dispute or have questions about the enforceability of an agreement, contact the Law Offices of David H. Schwartz, Inc. today. With his office located in San Francisco, Mr. Schwartz offers legal services to individuals and businesses throughout the San Francisco Bay Area.