Enforcing Oral Contracts, 0121 COBJ, Vol. 50, No. 1 Pg. 41

Author:BY MARK COHEN
Position:Vol. 50, 1 [Page 41]

50 Colo.Law. 41

Enforcing Oral Contracts

Vol. 50, No. 1 [Page 41]

Colorado Lawyer

January, 2021

CONTRACT LAW

BY MARK COHEN

This article discusses the enforceability of oral contracts under Colorado law.

A common misconception, particularly among non-lawyers, is that oral contracts are not enforceable. This misconception sometimes causes those with potentially winnable claims to prematurely decide against pursuing them. This article summarizes Colorado law governing oral contracts and discusses issues practitioners should consider when advising and representing clients seeking to recover on an oral contract.

The General Rule: Oral Contracts are Enforceable

Oral contracts are enforceable unless a specific enactment, such as a statute of frauds, renders a particular category of oral contracts unenforceable.1 Colorado courts follow this rule, declaring that formation of a contract requires only a meeting of the minds about terms sufficiently definite to enable the court to determine whether the contract has been performed.2 Further, an express contract may be evidenced by the parties' written or spoken words.3 Colorado also recognizes contracts implied in fact, which arise from the parties' conduct.4 Both express and implied contracts are created by a meeting of the minds to contract with each other.5 Like a written contract, an oral or implied contract must be supported by adequate consideration, but any benefit to a promisor or detriment to a promisee at the time of the contract, no matter how slight, constitutes adequate consideration.6

Colorado's Statutes of Frauds

Though lawyers sometimes refer to "the statute of frauds" as if there is only one, Colorado has several statutes that require certain contracts to be in writing. The two most often asserted as a defense to an oral contract claim are CRS § 38-10-108, which applies to leases for a period longer than one year and to the sale of (or any interest in) lands, and CRS § 38-10-112(1)(a), which applies to agreements not to be performed within one year.

CRS § 38-10-108 provides that "[e]very contract for the leasing for a longer period than one year or for the sale of any lands or any interest in lands is void unless the contract or some note or memorandum thereof expressing the consideration is in writing and subscribed by the party by whom the lease or sale is to be made."

CRS § 38-10-112(l)(a) states:

Except for contracts for the sale of goods which are governed by section 4- 2-201, C.R.S., and lease contracts which are governed by section 4-2.5-201, C.R.S., in the following cases every agreement shall be void, unless such agreement or some note or memorandum thereof is in writing and subscribed by the party charged therewith: (a) Every agreement that by the terms is not to be performed within one year after the making thereof.

Both statutes are similar in that, to overcome them, a claimant need only (1) provide a "note or memorandum" (2) subscribed by the party sought to be bound. Predictably, this has led to litigation over what constitutes a "note or memorandum" and what constitutes a subscription.

The Note or Memorandum Requirement

Courts have taken a broad view of what constitutes a note or memorandum. An email exchange may satisfy the requirement,7 as may an invoice,8 and even a notice of premium due may suffice.9 The note or memorandum need not be a single document but may consist of several writings with different dates.10

While courts have taken a broad view of what might be a note or memorandum, the contents of the note or memorandum must be sufficiently detailed to evidence a meeting of the minds as to the essential contract terms. In a case interpreting CRS § 13-10-108, the Colorado Court of Appeals held that the note or memorandum must show on its face or by reference to other writings (1) the parties' names, (2) the contract's terms and conditions, (3) the interest or property affected, and (4) the consideration to be paid.[11] Similarly, in an older case involving the sale of grain pursuant to a contract evidenced by letters and telegrams, the Court of Appeals held the writings were sufficiently definite when they established the kind and quantity to be sold, the price to be paid, and the time and place of delivery.12

The Subscription Requirement

In general, courts have interpreted the word "subscription" to require a signature. "A party subscribes to a document for purposes of the statute of frauds when she affixes her signature thereto with the intent to authenticate it as her own."13 However, a closer examination of the reported cases shows that it may not be necessary to show that the party sought to be held liable signed a particular document. In Beck with v. Talbot,14 the Colorado Supreme Court held that where a contract was signed by one party and retained by the other, letters that the latter party subsequently wrote referring to the signed contract were sufficient to show he had subscribed the contract.

As to what constitutes a signature, "[i]tmay be signed at anyplace, at the top or in the body. A signature, however, there must be, and a name, written or printed, is not to be reckoned as a signature unless inserted or adopted with an intent, actual or apparent, to authenticate the writing."15 The signature requirement evolved with the coming of the Information Age, and a party's typewritten name on an email may suffice.[16]

Burden of Proof

The burden of proof is on the plaintiff to show that the contract is not void because of the applicable statute of frauds.17

Exceptions to the Statutes of Frauds

If the party claiming under an oral contract subject to a statute of frauds cannot show that the other party subscribed to a note or memorandum containing the contract's essential terms, all is not lost. There are two exceptions to the statute of frauds—for full performance and partial performance.

Full Performance

Colorado courts will not enforce a statute of frauds where one party fully performs all the acts required by the oral agreement on which that party relied. In Schust v. Perington,[18] the Colorado Supreme Court overruled the trial court's determination that an oral agreement was void under the statute of frauds. The Court observed:

[T]he full performance on the part of Schust of the acts required of him under the oral agreement would remove the case from the statute of frauds.

Numerous decisions of this and other courts of last resort might be cited in support of the doctrine that, although a contract may have been void under the statute of frauds, nevertheless, if it has been fully performed by one of the parties it is binding on the other party.[19]

Partial Performance

Colorado law recognizes that a plaintiff's partial performance of an...

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