Business Law

Is a verbal business agreement enforceable in California?

Often, yes. California lets most contracts be made orally, but Civil Code section 1624 requires a signed writing for some deals, including agreements that cannot be performed within a year, promises to pay someone else's debt, and real estate sales and longer leases. A lawsuit on an oral contract generally must be filed within two years, compared with four years for a written one.

Last updated October 5, 2026.

Plenty of business gets done on a handshake: a supplier's promise on the phone, a split of profits agreed over coffee, a remodel priced in a text. Contracts are a core part of our business law practice, and the first question in many disputes is whether the deal was ever enforceable at all. This page explains the California rules for oral agreements, the exceptions that require a writing, how oral terms are proved and the deadlines that apply.

What makes any agreement a contract?

Civil Code section 1550 lists four essentials: parties capable of contracting, their consent, a lawful object and sufficient consideration. Nothing in that list requires paper. Under section 1622, all contracts may be oral except those that a statute specifically requires to be in writing. Section 1619 adds that a contract may be express, stated in words, or implied from conduct. An oral agreement that meets the four essentials and is not on a statutory "writing required" list can be enforced like any other contract; the harder part is usually proving what the terms were.

How does a dispute over a verbal agreement usually unfold?

  1. Reconstruct the terms. Write down who agreed to what, when, where and in front of whom: price, scope, deadlines and payment terms.
  2. Collect the evidence. Texts, emails, invoices, deposits, checks, delivery records and the way both sides behaved after the agreement often show its terms better than memory.
  3. Check whether a writing was required. Compare the deal with the categories in Civil Code section 1624 and the other statutes in the table below.
  4. Note the date of breach. The clock for a lawsuit on an oral contract is two years (Code of Civil Procedure section 339(1)); civil actions can only be started within the periods the code prescribes after the claim accrues (section 312).
  5. Send a written demand. A letter that states the terms as you understand them and what you want done also creates a record, and the other side's reply may confirm the agreement.
  6. Choose a forum. Smaller claims may fit small claims court; larger ones go to the superior court. Our page comparing small claims and hiring a lawyer in Los Angeles County walks through that choice.
  7. Prove the deal. In court, the terms of an oral agreement are proved with testimony and the documents and conduct around it.

Which business agreements must be in writing?

Under Civil Code section 1624(a), the following are invalid unless they, or some note or memorandum of them, are in writing and signed by the party to be charged or that party's agent. Other statutes add their own writing rules.

Agreements that need a signed writing in California
Type of agreementRuleLaw
An agreement that by its terms is not to be performed within a year from when it is madeWriting signed by the party to be chargedCiv. Code 1624(a)(1)
A promise to answer for another's debt, default or miscarriage (a guaranty), except as section 2794 providesWriting signed by the party to be chargedCiv. Code 1624(a)(2)
A lease for longer than one year, or a sale of real property or an interest in itWriting; an agent's authority must also be in writingCiv. Code 1624(a)(3)
Hiring a broker or other person to buy, sell or lease real estate for more than a year for a commissionWriting signed by the party to be chargedCiv. Code 1624(a)(4)
An agreement not to be performed during the lifetime of the promisorWriting signed by the party to be chargedCiv. Code 1624(a)(5)
A business lender's commitment to lend or extend credit over $100,000, not primarily for personal, family or household purposesWriting signed by the lenderCiv. Code 1624(a)(7)
A sale of goods for $500 or moreA signed record sufficient to show a contract for sale, with exceptions for specially manufactured goods, admissions in court, and goods paid for and accepted or received and acceptedCom. Code 2201
An employment contract paid by commissionWritten contract stating how commissions are computed and paid, with a signed copy to the employeeLab. Code 2751

Section 1624(a)(6) adds a rule for a buyer of real property who agrees to pay a loan secured by the property, and sections 1624(b) and (d) contain special rules for certain financial contracts between businesses and for electronic messages in real estate deals.

How long do you have to sue?

Statutes of limitations for contract claims (Code of Civil Procedure)
ClaimDeadlineLaw
Breach of a contract not founded on a writing2 yearsCCP 339(1)
Rescission of a contract not in writing2 years from the facts that allow rescission (from discovery, if fraud or mistake)CCP 339(3)
Breach of a contract founded on a writing4 yearsCCP 337(a)
Book account, account stated based on a written account, or an open account with written items4 yearsCCP 337(b)
Rescission of a written contract4 years from the facts that allow rescission (from discovery, if fraud or mistake)CCP 337(c)

A mixed deal, such as a short written quote followed by oral changes, can raise a question about which deadline applies, so it is safer to plan around the shorter one. Our page on deadlines to sue for breach of contract or property damage in California covers how these periods are counted and what can pause them.

What changes the answer?

Whether the deal can be finished within a year

Section 1624(a)(1) reaches only agreements that, by their own terms, are not to be performed within a year from when they are made. The words "by its terms" point to what the parties agreed, not to how long the work happened to take. A commitment to supply goods every month for two years falls inside the rule; a remodel scheduled for six weeks does not become a one-year contract because it ran late.

Whether something was signed later

The statute is satisfied by "some note or memorandum" signed by the party to be charged, not only by a formal contract. A signed proposal, a confirming letter or an invoice the other side signed may help. Whether a particular email or message counts depends on what it says and how it was signed, so preserve everything.

Whether you are changing a written contract orally

Civil Code section 1698 lets a written contract be modified by a written agreement, by an oral agreement to the extent the parties have carried it out, or, unless the contract says otherwise, by an oral agreement supported by new consideration. If the modified contract falls within section 1624, the writing requirement still applies (section 1698(c)). Many written contracts say changes must be in writing; read that clause before relying on a conversation.

Whether the promise is a guaranty

A promise to pay a customer's or a relative's business debt if they do not is a "special promise to answer for the debt, default, or miscarriage of another" and needs a signed writing under section 1624(a)(2). A verbal "don't worry, I'll cover it" from a third party is a common source of disputes.

Whether real estate is involved

Commercial leases longer than one year and agreements to buy or sell property must be in writing (section 1624(a)(3)), and a broker's commission agreement for those deals must be too (section 1624(a)(4)). A month-to-month or one-year arrangement for space falls outside the one-year lease rule.

Whether the business name and status are in order

Even a valid contract can be hard to enforce for procedural reasons. A business using an unfiled fictitious name may not maintain a lawsuit on contracts made in that name until it files and publishes its statement (Business and Professions Code section 17918); see fictitious business name rules in Los Angeles County. And contracts a company makes while its powers are suspended by the Franchise Tax Board are voidable by the other side (Revenue and Taxation Code section 23304.1), as our page on a suspended LLC or corporation explains.

A worked example

For example, imagine a hypothetical Glendale bakery owner who agrees by phone with a local contractor to remodel the shop's counter area for $20,000, half paid up front and half on completion, with the work to be finished in six weeks. The contractor texts "Confirmed, starting the 3rd, $20k total" and cashes the $10,000 check. Nothing else is signed.

The agreement is not on the section 1624 list: it can be performed well within a year, it is not a real estate sale or long lease, and no one is guaranteeing another's debt. The text message, the cashed check and the work itself are evidence of the terms. Suppose the contractor stops after demolition and does not return. The owner's claim would be a breach of an oral contract, so Code of Civil Procedure section 339(1) gives a two-year limit, counted from the breach.

As an illustration of the arithmetic only: if finishing the work costs the owner $14,000 more than the $10,000 still unpaid under the deal, the difference she might claim is $4,000, plus other provable losses. Whether she could recover that, and how much, depends on evidence and defenses this example does not address.

Common mistakes with verbal agreements

  • Assuming an oral deal is worthless. Most can be enforced; the issue is proof, not validity.
  • Assuming every oral deal is enforceable. Guaranties, long leases, real estate sales, agreements that cannot be performed within a year and, with exceptions, sales of goods for $500 or more need a signed writing or record.
  • Waiting too long. Two years passes quickly when the parties keep "working it out." The deadline for a written contract is four years, but an oral one gets two.
  • Deleting texts and voicemails. Informal messages are often the only record of the terms.
  • Relying on an oral change to a written contract. Check the contract's change clause and section 1698 first.
  • Paying commissions on a handshake. Labor Code section 2751 requires a written commission contract for employees; see what a California employer must give new employees in writing.

What to do this week

  1. Write a dated summary of the agreement: parties, price, scope, deadlines and what each side has done so far.
  2. Export and back up the texts, emails, voicemails and payment records that mention the deal.
  3. List witnesses to the conversations and what each one heard.
  4. Mark the date of the breach and the date two years later.
  5. Compare the deal with the writing-required table above.
  6. For future deals, put the terms in a short signed document; our article on protecting your business with strong contracts lists the clauses that matter.
  7. If you have already been sued over an oral agreement, read how long you have to respond to a lawsuit in California and calendar the deadline today.

Frequently asked questions

Can a text message or email make an agreement enforceable?

It can be strong evidence of an oral agreement's terms, and in some cases it may serve as the signed "note or memorandum" section 1624 calls for. Whether it does depends on its content and how it was signed, so keep the full thread rather than screenshots of single messages.

Is a handshake partnership a real partnership?

It can be. Under Corporations Code section 16202(a), two or more people who carry on a business as co-owners for profit form a partnership whether or not they intend to, and the statute's default rules then apply. Our page on what happens when a business partner wants out explains those rules.

Are oral contracts harder to win?

They are harder to prove, because the court has to decide what the terms were from testimony and surrounding evidence.

Can I get my attorney fees back if I win on an oral agreement?

Oral deals rarely include an attorney fee clause, and that clause is usually what makes fees recoverable in a contract case. Our page on recovering attorney fees under a contract explains when fees are available.

What if part of the deal was written and part was oral?

The written part, its terms about changes and any merger clause will matter. Section 1698 governs oral changes to written contracts, and the deadline to sue may differ between the written and oral parts, so plan around the two-year period until a lawyer reviews it.

Does the two-year deadline start when we made the deal?

No. Code of Civil Procedure section 312 runs the period from when the cause of action accrues, not from the day the deal was made. When a claim accrues can depend on the facts, so count from the earliest date the other side failed to perform.

How can Glendale Law help?

We help businesses document agreements before problems start, and we evaluate and pursue or defend claims when a handshake deal breaks down. When a dispute reaches court, our civil litigation team handles the case. Call (818) 244-9000 or request a consultation.

Sources

  1. California Civil Code section 1550: Essential elements of a contract (California Legislative Information)
  2. California Civil Code section 1619: Express and implied contracts (California Legislative Information)
  3. California Civil Code section 1622: Contracts may be oral (California Legislative Information)
  4. California Civil Code section 1624: Contracts that must be in writing (statute of frauds) (California Legislative Information)
  5. California Civil Code section 1698: Modification of written contracts (California Legislative Information)
  6. California Code of Civil Procedure section 312: Time to begin civil actions (California Legislative Information)
  7. California Code of Civil Procedure section 337: Four-year limit for written contracts (California Legislative Information)
  8. California Code of Civil Procedure section 339: Two-year limit for oral contracts (California Legislative Information)
  9. California Commercial Code section 2201: Sale of goods for $500 or more (California Legislative Information)
  10. California Corporations Code section 16202: Formation of a partnership (California Legislative Information)
  11. California Labor Code section 2751: Commission contracts must be in writing (California Legislative Information)
  12. California Business and Professions Code section 17918: Unfiled fictitious business name and contract actions (California Legislative Information)
  13. California Revenue and Taxation Code section 23304.1: Contracts of suspended taxpayers voidable (California Legislative Information)

A handshake deal gone wrong?

Our Glendale team can review what was agreed, the evidence you have and the deadlines that apply.

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