Can I Win a Case Involving a Verbal Contract?

Despite warnings from lawyers and others to put contracts or other efforts to confirm the understanding of an agreement between parties in writing, many people do not place put their agreement or contract in writing.

The purposes of having a contract reduced to writing are to confirm the terms of the contract and to ensure a clear, definite and certain agreement. However, even with a written agreement there are often issues over what the duties of each party are.

Without a written contract, will the court enforce the verbal contract/ agreement?

There are laws such as the Statute of Frauds which prevent a verbal contract from being enforceable with a few exceptions. A verbal contract that needs to be performed within 12 months from the date of its making and contracts involving the purchase of real estate are two examples of contracts that should be in writing to be enforceable. Yet there are exceptions. Providing a money deposit or down payment by check or credit card may be adequate to constitute the writing and, with adequate testimony, may permit a party to prevail in a lawsuit.

Often couples who are romantically involved will have property that they intended to hold in joint names but were never able to accomplish. Some of the reasons for not being able to hold the property jointly could be that one of the parties had filed bankruptcy recently, had poor or no credit, or the parties were going to have the property titled jointly when they married.

In a case in the Circuit Court for Anne Arundel County, a couple lived together, were unmarried, and sought to purchase a home. They intended for the property to be in joint names. The mortgage company, however, would not permit one of the parties to be named on the deed/title of the home because that individual had recently filed bankruptcy. In this case, the girlfriend had contributed one half of the mortgage payments and had provided her services to make many substantial home improvements. Those payments and services were provided over a period of three years. The boyfriend decided he would end their relationship and asked the girlfriend to leave the home because his name was solely on the title.

The Court found in her favor. The reasoning of the Court was that a constructive or resulting trust had occurred, that a confidential relationship existed between the parties, that the boyfriend was the dominant party, and that it would be unjust enrichment for the boyfriend to keep the home solely in his name.

What is a constructive trust and what is unjust enrichment?

A constructive trust can occur where one party has title in his/her name and the other party has substantially contributed both money and services that benefit the property and the sole-titled party as exemplified in the facts above. The Court creates a constructive trust wherein the sole title owner is the trustee for the benefit of the non-titled party. It is not necessary that the parties had a written agreement or a verbal agreement. The law treats cases like this based on equitable theories and those theories attempt to prevent fraud and unjust enrichment. In the case described above, adding the girlfriend to the title through the appointment of a trustee prevents unjust enrichment. Unjust enrichment is a general equitable principle that no person should be allowed to profit at another's expense without making restitution for the reasonable value of any property, services, or other benefits that have been unfairly received and retained. The example above is just one factual example of the many applications of constructive trusts. Other cases may involve fraud, misrepresentation, or other ways for one party to receive sole title.

Another example of unjust enrichment involves engagement rings. An engagement ring is a conditional gift. The condition is that the parties marry. If the engagement is broken, regardless of who broke it off, the party who gave the engagement ring is entitled to obtain it back. If the ring, however, is given to the other party on a birthday or on Valentine’s Day or a holiday such as Christmas it may be an unconditional gift and the ring then does not have to be returned. The courts reason, when dealing with the conditional gift of an engagement ring, that the equitable theory of unjust enrichment applies. If the engagement is broken off, then it would be unfair and unjust for the party who received the engagement ring to benefit. In engagement ring cases, most persons do not express, in writing, that the ring is a conditional gift. Courts typically grant the relief sought, being the return of the ring or of the ring’s value, through either a replevin action or a detinue action.

Fred Antenberg is an attorney in Howard County Maryland who has experience in evaluating constructive and resulting trust cases and resolving them through either negotiation or the filing of a lawsuit. Call Fred today for a free initial consultation at 410-730-4404.