No Really; I Promise To Pay You. (Yeah, Right!)

In another time, a man’s word was his bond. Today, it’s preferred to get a “man’s word,” in writing, as opposed to relying on his oral promise. Nonetheless, our legal system still provides for enforcement of a verbal guarantee. See Barrie-Chivian & another v. Lepler, Mass. App. Ct., No. 14-P-780, slip.op. (July 31, 2015)

To be enforceable by a court, every contract (whether written or oral) must meet several basic requirements. Those include:

  1. Consideration: each party promising to provide something of value to the other;
  2. Offer and Acceptance: One party must convey a clear or definite offer, and the other must convey a clear or definite acceptance;
  3. Legal Purpose: The purpose for the contract must not violate the law;
  4. Capable: Minors and mentally handicapped individuals usually don’t know what they’re doing. People making contracts must understand what they’re doing; and,
  5. Mutual Assent: Parties must intend to be bound by their agreement, and must agree on the essential terms.

Federal or state laws may impose more requirements on particular types of contracts, and some contracts must be in writing.

In Barrie-Chivian v. Lepler, a son-in-law asked his in-laws for loans to develop his real estate company. The son-in-law promised to provide written, personal guaranties for repayment of the loans to his in-laws, but never did. The in-laws sued their then former son-in-law under the theory of Promissory Estoppel. That theory provides that if a party changes his or her position substantially by acting or forbearing from acting in reliance upon a gratuitous promise, then that party can enforce the promise despite the essential elements of a contract not being present. Here, the in-laws loaned the money upon the son-in-law’s gratuitous promise.

The son-in-law tried to defend against his in-laws complaint by arguing that the Statute of Frauds prevented his in-laws from holding him liable. The Statute of Frauds refers to the requirement that certain kinds of contracts be in writing, signed by the party to be charged. Contracts in which one party becomes a surety or guarantor for another’s debt or other obligation, such as in this case, is one such contract generally required to be in writing.

Fortunately for the in-laws, Massachusetts case law provides that “a party may be estopped from asserting the Statute of Frauds defense if, through its own representations or conduct, in induces ‘detrimental reliance.’” See Cellucci v. Sun Oil Co., 2 Mass. App. Ct. 722, 728-729 (1974). Here, the son-in-law admitted to inducing his in-laws reliance by promising to execute a written agreement, which he never did.

If you are considering entering into a contract of any kind, be sure that you know your rights and responsibilities in advance! The attorneys at Hutchins Law, P.C. can help you understand your rights and protect your interests. If you have questions about a new or existing contract, contact us today.

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