Verbal agreements and oral representations made during negotiations for an agreement, when later reduced to writing, are unenforceable. Under the law, when the agreement of the parties is later reduced to writing and verbal agreements and/or representations are not contained in the original written agreement, such omitted terms are NOT ENFORCEABLE! The Parol Evidence Rule, a rule of common law in most jurisdictions, excludes such representations made prior to the writing and/or not contained in the written agreement.
The Ohio Supreme Court has held: “The Parol Evidence Rule was developed centuries ago to protect the integrity of written contracts.” When two parties have made a contract, and have expressed it in a writing to which they have both agreed as the complete and accurate integration of that contract, evidence of prior understandings and negotiations will not be admitted for the purpose of varying or contradicting the writing. Other jurisdictions have held similarly, as a basic principle of law and equity.
A written agreement is conclusively presumed to represent the entire agreement of the parties. One exception exists; where the entire agreement of the parties has not been reduced to writing. In such case, other terms that were agreed upon may be heard by the Court, provided they do not contradict any of the written terms. Another exception exists when fraud is alleged by either party. Where verbal agreements also disclose the existence of a mutual mistake, these may be sufficient to deny a valid written contract.
Prudent business practices require that contracts, in writing, be signed, only after fully encompassing all of the terms discussed and agreed upon. By addressing all of the potential future possibilities or “what ifs?,” one may eliminate claims that frequently occur in personal and business transactions. Stated simply, in the words of one English humorist: “Oral agreements aren’t worth the paper they’re not written on.”
J. NORMAN STARK is an Attorney-at-Law, Architect Emeritus, (AIA, NCARB), admitted to practice law before the Bar of Ohio, the US District Courts, Ohio, the US Court of Appeals and the U.S. Supreme Court. He has over 40 years of experience in construction and consulting expertise in construction accidents and disputes. He has professional experience in Business and Personal legal claims, Real Estate, Public and Private Construction, Litigation, Arbitration, Mediation and Expert Witness services. His office is in Cleveland, Ohio.
His experience includes forensic expertise and investigation in construction contracts, construction law, products liability, construction claims, claims and loss damages, work injuries, construction defects, mechanics’ liens, jobsite injuries, jobsite deaths, architecture, building codes, standards, water intrusion, mold, lead contamination, copyright and design defects. Mr. Stark is the author of the Construction Claims Investigation Worklist©
2 thoughts on “Legally Speaking: Construction Contracts – Verbal Agreements”
Thankfully, with the existence of so many different standard forms, written contracts are relatively prevalent in the construction industry. However, instances can still be found where contracting parties have only a verbal agreement.
Further, and more common, are situations where the main contract is in writing, but is then subject to one or more variations which are agreed verbally.
The difficulty with contracts that are formed (or varied) verbally is that, if there is any disagreement about the terms of the agreement, proving what was and what was not agreed can be difficult. It is therefore worth considering the impact of a couple of recent cases that were heard in the Technology and Construction Court (TCC).
This blog is really nice and informative. Thanks for the sharing.