EC November/December, 2002

Dear Ms. Fershtman:

“I am buying a horse on payments over time.  The seller and I have a written agreement, and it states that I was to have the horse paid off by December 1, 2001.  Last year the seller and I changed the contract, but not in writing. The change would allow me to lower my payments and change the due date to December, 2002.  I have made all payments on time since we changed the agreement. Now the seller says I have failed to honor the agreement.  He says he wants to enforce the written agreement and take away the horse. He  also says I owe new charges that are not found in the written agreement. Can he do these things?”

– J.  (Oregon)

J  is involved in a dispute over a contract. What makes her dispute unusual is that the installment sale transaction started out with a written agreement. The parties invited trouble later when they began to rely on verbal changes to their agreement. Now, as a result, J believes she can make installment payments that are lower than the agreement specifies. At the same time, the seller insist that the payment arrangement was never changed, but he says the contract was changed to add new charges and penalties.

It is obvious that these parties cannot agree on what their contract says anymore. But they do agree on one thing – the written contract has completely lost its integrity.

As explained below, there is no happy or easy answer to this dispute. But it was preventable. The dispute could have been avoided if the parties kept all of their agreements – including the changes – in writing.

The Problem of Verbal Agreements

Verbal contracts can often be enforced. The problem is, disputes involving a verbal contract often turn into a “shouting match” when each party to the same transaction has a completely different understanding of the agreement. In J’s situation, that is exactly what has happened.  She and the horse seller believe the contract was changed, but there is nothing in writing to prove it.

When differences like this take center stage in a court of law, the question becomes whom to believe.  As a result of these differences, the outcome of a verbal contract dispute is rarely certain. Three things are always guaranteed, however — if the verbal contract dispute turns into a lawsuit, resolving it will not be easy, quick, or cheap. A carefully worded written contract, signed by all parties involved, is an excellent way to avoid these disputes.

How to Improve Your Contracts

What goes into a carefully drafted contract? Over the past 10 years, my books and articles have explained several possible ingredients. In addition, to prevent the problem of verbal understandings that purport to change a written contract’s terms, the contract can state, at a minimum:

• The parties intend that the written contract is the complete expression of their understanding.

• The written contract replaces any understandings that the parties may have had before the written contract was executed.

• Any changes to the written contract will only be valid if they are in writing and  signed by all parties involved.

• As I have said for years, an incomplete contract is sometimes just as bad as no contract at all.  However, careful planning in the contract-drafting stages not only can protect the integrity of the written contract but also can also avoid costly disputes in the future.

Julie I. Fershtman, Attorney at Law

This article does not constitute legal advice. When questions arise based on specific situations, direct them to a knowledgeable attorney.

About the Author

Julie I. Fershtman is an attorney with a law practice serving the horse industry. In her 15 years of experience, she has achieved numerous courtroom victories and has drafted hundreds of contracts.  An independent lawyer rating service gives her its highest rating for abilities.  She can be reached at (248) 851-4111.

Ms. Fershtman is the author of two highly regarded books on Equine Law.  MORE Equine Law & Horse Sense sells for $22.95 + $5 shipping and handling.  Equine Law & Horse Sense sells for $17.95 + $5 shipping and handling.  Michigan residents add 6% sales tax.  To order, contact Horses & The Law Publishing at (866) 5-EQUINE, a toll-free number, or send check or money order to Horses & The Law Publishing, P.O. Box 250696 Franklin, MI 48025-0696.