Is a verbal agreement valid?
UPDATED: Sep 3, 2011
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Is a verbal agreement valid?
I’m in a situation where my sister (POA) of my parent’s estate found a check for $25,000 that had “loan” in the memo. Through the years all of us kids received X-mas money, etc. It was a verbal understanding with my parents that my moneys would go towards my loan. My fear is without anything in writing I’m going to be held responsible twice for that money that’s been paid back over time. My sister and I haven’t had a good relationship for some time now and she will stick it to me every chance she can get. Can I tell her that my parents and I had a verbal agreement and that this has been paid in full?
Asked on September 3, 2011 under Bankruptcy Law, Nevada
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 11 years ago | Contributor
As a general matter, oral or verbal agreements, including oral or verbal loan agreements, are valid. The difficulty is proving them--i.e. providing what the agreement was. A more significant difficulty from the point of view of proving repayment of the loan is that if someone has repaid a loan, that person would ordinarily be able to document repayment by cancelled checks, receipts for money orders, etc. From what you write, it seems that your "loan" was "repaid" by not giving you X-mas money and the like and applying the amount to the loan. (Note: if the money never changed hands, this is more like gradual loan foregiveness, not repayment.) This will be very difficult to prove and may (if a lawsuit ensues) be difficult for a judge or jury to believe, since it is so "convenient" for the debtor. (Consider: you would be arguing that $25,000 was repaid without any documentation whatsoever.)
You should consult with an attorney about your situation in detail. Possibly ways to defend yourself:
1) Some contracts have to be wrting to be enforced; depending on the exact terms of the loan, this *could* be one of them. That lack of enforceability may help you.
2) Writing "loan" in the memo space of the check is evidence that it is a loan (rather than a gift), but it may not be enough--possibly you can provide evidence or testimony that this was actually a gift.
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