Are verbal agreements enforceable in California?

Q: I recently entered into an agreement to purchase a boat from an owner, using a broker’s services. We held a formal meeting with all parties attending and around seven people altogether. During the meeting, we worked out terms of a “lease to own” deal, and shook hands on the agreed terms of the deal. This was a verbal agreement with six witnesses, and I understand that verbal and oral agreements are treated the same as written agreements in California. The agreement called for a two week escrow period to allow me to secure a slip for the boat. Unfortunately, I was notified by the broker a few days later that the owner had sold the boat to another buyer, without notifying me and breaking the terms of our deal. I would like to pursue legal action against the owner for breaking our agreement. Can you help with this?

A: Our reader is generally correct about verbal agreements. They are enforceable in California, and just about everywhere else, subject to certain filing deadlines and other legal and procedural issues that are different than the rules for the enforcement of a written contract.

First, our reader should note that a verbal agreement is enforceable only to the extent that the parties are able to agree upon, or otherwise prove, the terms of the agreement. He is confident that his six witnesses will support his view of the terms of the agreement, but those witnesses may or may not testify in his favor when they raise their right hand to take an oath on the witness stand.

Verbal agreements are subject to other significant limitations, depending on the type of transaction and the amount of money involved. The most significant limitation is set forth in a set of laws commonly referred to as the “Statute of Frauds.” These rules require certain agreements to be in writing, to avoid the conflict that can arise when parties fight over what was said and what was promised when creating the contract.

Generally speaking, if the agreement is of major significance or is to last a long time, the Statute of Frauds will require it to be in writing. Our reader’s case involves the purchase and sale of personal property, and that transaction will be subject to the provisions of Article 2 of the California Commercial Code. Specifically, section 2201(1) provides that a contract for the sale of goods for the price of $500 or more is not enforceable unless there is a written agreement. Our reader did not say anything about the purchase price of the boat but we can assume that it was more than $500.00, in which case his verbal agreement would not be enforceable.

The Statute of Frauds is invoked again in this case because a yacht broker was involved in the transaction. Yacht brokers in California are regulated by the Division of Boating and Waterways (DBW) under the provisions of the California Yacht and Ship Brokers Act, which requires (in section 716) a written agreement for the purchase and sale of a yacht. The failure by the yacht broker to provide a written agreement for this transaction may subject the broker to scrutiny by DBW but it will probably not allow for any direct legal claim against the broker.

Finally, even if our reader’s offer was made in writing, he would still have a problem asserting a legal claim against the seller of the boat. In a case like this, as in any claim for a breach of contract, the aggrieved party must prove that he or she has suffered a monetary loss or some other form of quantifiable damage. The fact that our reader was not able to buy a boat does not appear, on the surface, to have cost him any money. And the law does not allow an aggrieved party in a contract dispute to recover money to compensate him for inconvenience, or for his own time spent (or wasted) on a project like this. He may have incurred some expenses relating to travel, boat inspection, etc., and he may be able to recover that money if the expenses were incurred in reliance upon the promises made to him. A claim like that is probably best handled in small claims court.

David Weil is licensed to practice law in the state of California and as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state.

 David Weil is the managing attorney at Weil & Associates (weilmaritime.com) in Long Beach. He is an adjunct professor of Admiralty Law at Loyola University Law School, a member of the Maritime Law Association of the United States and is former legal counsel to the California Yacht Brokers Association. If you have a maritime law question for Weil, he can be contacted at 562-438-8149 or at dweil@weilmaritime.com.

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