Individuals in Michigan and around the country enter into verbal agreements every day. While these agreements usually involve an offer that is accepted in return for some sort of consideration, the agreements may be difficult to enforce because their terms are not clearly laid out in writing. Another problem with verbal agreements is that people sometimes forget what they have agreed to, misunderstand what their duties are or die before they have honored them. This is why all states have laws on their books that require certain types of contract to be in writing. These laws are referred to as statutes of frauds because they are drafted to prevent misrepresentation and fraud.
Michigan’s statute of frauds
According to Section 566, promises or contracts that must be memorialized in writing and signed include agreements to lend money, make financial accommodations or extend credit, agreements to sell or transfer real estate, agreements to make commission-based compensation payments, and agreements to provide medical treatment. Section 440 also deals with written contracts. It states that agreements involving the sale of goods worth $1,000 or more and agreements between merchants must be in writing.
Verbal agreements that are not covered by Michigan’s written contract rules may be enforceable under the legal doctrine of promissory estoppel. To make such an argument successfully, the party seeking to enforce a verbal agreement must convince the court that a promise was made, that they relied on the promise when they took action or decided not to take action, and that they suffered injury, loss or damage because the promise was broken.
Avoiding ambiguity and preventing litigation
Attorneys with business law experience may advise their clients to put all of their agreements in writing even if the law does not specifically require them to do so. What people say does not always make their intentions clear to the listener, and the resulting misunderstandings can give rise to contentious disputes. When the terms of an agreement are put down in writing and the remedies for breaching them are made clear, ambiguity and costly litigation may be avoided.