An Oral Contract Ain’t What it Used to Be

Long gone are the days where a man’s word was worth its weight in gold. In today’s modern age, false assurances can leave an individual disappointed and sometimes seemingly hopeless. But nothing is more detrimental than a broken promise given by a future or current employer. In today’s economy, employees can no longer risk the possibility of relying on the words of their employers.

As an employee, it is vital to get informed and know how to ensure your employer stays accountable to his/her agreements. Here’s a section of my book “The Employee Rights Handbook” that deals with just that! Read now!

Turning an Oral Contract Into a Written Document

A formal agreement is not always required to serve your purposes; in some cases an oral contract confirmed in writing can be an acceptable substitute. Before I describe how this may be accomplished, a few words about oral contracts are appropriate. An oral contract is a verbal agreement between the employee and the company defining their working relationship. Such contacts may be binding when the duties, compensation, and terms of employment are agreed to by both parties.

There are certain types of contracts that must be in writing to be legally binding. The rule requiring this is called the statute of frauds. While there are a number of items covered in the statute of frauds, the one of direct interest to you regarding employment states that any contract agreement that will require more than a year to complete must be in writing. Each state has its own version of the statute of frauds, and various courts interpret its provisions differently. However, remember that most courts do not support indefinite employment agreements based on an oral contract, because employment could be terminated at any time prior to the elapse of a year. Thus, to ensure enforceability of a working arrangement in excess of one year, you must include such an arrangement in writing.

Many workers have oral agreements simply because their companies refuse to give them a written contract. In fact, companies like to operate under oral agreements because there is no written evidence to indicate what terms were discussed and accepted by both parties when

they entered into the employment arrangement. If disputes arise, it is more difficult for the employee to prove that the company failed to abide by the terms of the agreement. For example, if a bonus totaling $10,000 to be paid was accepted orally, a dishonest employer could deny this by stating that a gratuitous bonus arrangement had been accepted that was substantially less than $10,000. The employee would then have to prove that both parties had agreed upon the higher bonus figure.

When a legal dispute arises concerning the terms of an oral contract, a court will resolve the problem by examining all the evidence that the employee and company offer and weighing the testimony to determine who is telling the truth. Thus, to avoid problems, all employees should try to obtain a written contract to clarify their rights. However, if your company refuses to sign a written agreement, there are ways to protect yourself if you have an oral contract. Your chief concern should be directed toward obtaining written evidence that indicates the accepted terms, including information that defines your compensation, additional benefits, job security concerns, notice of termination requirements, and other considerations.

If your company refuses to sign a written agreement, it is advisable to write a letter whenever you reach an oral agreement relating to your job.

After being hired, always write a letter confirming the points you and the company agreed upon if you cannot obtain a written contract. Be aware that in many instances the letter you write to the company can serve in place of a formal employment contract. You may find that your letter holds you to your stated understanding of the employment terms, so be very careful, specific, and accurate in your wording. If the company replies in agreement, particularly if it replies in writing, or does not argue with your stated understanding, a court may rule that these terms are also binding on the company. Another way that a company may be bound to certain terms of employment is through statements published in their employee handbook or personnel manual.

Write the letter with precision, since ambiguous terms are resolved against the letter writer. Be sure to keep a copy of the letter for your own records and save the certified mail receipt. If at a later date the terms of the oral agreement are changed (for instance, additional compensation is paid to you or your duties are expanded), write another letter specifying the new arrangement that has been reached. Keep a copy of this letter and all correspondence sent to and received from your company for your protection. This may also include a series of e-mails sent back and forth between the parties.

For a full depth analysis on this topic and a sample letter, visit to purchase “The Employee Rights Handbook” today!


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