Simone Lawson
A contract is a written or oral agreement between two or more parties that is legally binding and enforceable by law. In California, certain types of contracts must be in writing to be valid and enforceable. These include contracts for debt collection, the sale or lease of land, surety bonds, and contracts extending credit of more than $100,000. Written contracts offer greater protection to all parties involved and should include specific details such as the work to be performed, the price, payment schedule, and completion date. While oral contracts are also legally enforceable in California, they may be challenging to prove in the event of a breach, and they have a shorter statute of limitations than written contracts.
| Characteristics | Values |
|---|---|
| Contract type | Written or oral agreement |
| Legality | Legally binding |
| Parties involved | Two or more parties or entities |
| Voluntariness | All parties must enter into the agreement voluntarily |
| Mental capacity | All parties must be legally and mentally competent and of sound mind |
| Mutual understanding | The parties must intend to enter into a contract and must both have the same understanding of the terms of the agreement |
| Written record | Email exchanges that discuss the oral agreement terms |
| Contract details | Work, price, when payments will be made, who gets the necessary building permits, when the job will be finished, warnings and notices about the right to cancel, mechanics liens, and allowable delays |
| Changes to contract | Any changes to the contract must be noted in writing on a "change order" and include any price changes |
| Statute of limitations | Four years for written contracts, two years for oral contracts |
| Enforceability | The contract creates an obligation that must be – or not – performed by the contracting parties – or risk liability or legal action for defaulting |
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![California Public Contract Code [2025 Edition]](https://m.media-amazon.com/images/I/518XH9vxSjL._AC_UY218_.jpg)
What You'll Learn
Legally binding
A contract is a legally binding agreement between two or more parties or entities involved in a deal or transaction. It outlines the legal rights and responsibilities of the parties involved and is intended to be enforceable by law. For a contract to be valid and enforceable in California, certain conditions must be met.
Firstly, the contract must be entered into voluntarily by all parties. If any contracting party can prove that they signed the contract under duress, coercion, or undue influence, the contract may be revoked by a court. Only parties who are legally and mentally competent and of sound mind can enter into a contract. Additionally, all contracting parties must clearly indicate their approval of the contract's terms for it to be binding and enforceable.
Secondly, the contract must meet the requirements of the Statute of Frauds, a section of the California Civil Code that outlines when a contract must be in writing and what a written agreement must include. Most contracts must be in writing to be valid, with only a few exceptions. Certain types of contracts, such as those for debt collection, the sale or lease of land, surety bonds, marriage, broker agreements, debt repayment, sales agreements, and agreements that take longer than a year to complete, are required to be in writing.
Thirdly, the contract must have a meeting of the minds. The parties must intend to enter into a contract and have the same understanding of the terms of the agreement. The terms of the contract should be clear and unambiguous to ensure that all parties understand their obligations and rights.
Lastly, the contract must have a lawful purpose and not violate any laws or regulations. It is worth noting that California tends to favour contracts that promote fair competition while generally disfavouring those that promote unfair competition.
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Statute of limitations
In California, a contract can be written or oral, but it is advisable to enter into written contracts. Written contracts can be evidenced by email exchanges that discuss the terms of the oral agreement. An exchange of written or email correspondence may even be sufficient to find the existence of a written contract.
California law requires certain types of agreements to be in writing to be enforceable. For instance, contracts where performance cannot be completed within a year and any agreement for the transfer of title to real estate must be in writing.
The statute of limitations refers to the amount of time one has to file a lawsuit from the date the breach of contract occurred. In California, the statute of limitations for breach of a written contract is four years from the date the contract was broken. This is different from the statute of limitations for breach of an oral contract, which is two years from the date of the breach.
The statute of limitations for a case is dependent on the cause of action, which is the legal reason for suing. For instance, the statute of limitations for personal injury or wrongful death is two years, while for damage to personal property, it is three years. It is important to note that statutes of limitations can be tricky to calculate and are fact-specific. If there are doubts about meeting the deadlines, it is advisable to consult a lawyer.
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Contract types
In California, there are several types of contracts that are commonly encountered, each with its own unique characteristics and legal implications. Here are some of the key contract types:
Written Contracts
Written contracts are agreements that are set out in writing and signed by the parties involved. While not all contracts in California need to be in writing to be valid, certain types of contracts, as outlined by the Statute of Frauds, are required to be in writing and signed to be enforceable. These include:
- Contracts where performance or completion will take more than a year.
- Agreements for the lease of real estate for more than a year or the sale of real property.
- A mortgage or the extension of a mortgage.
- A premarital agreement.
- Contracts with respect to commercial transactions.
Oral Contracts
Oral or verbal contracts are formed through spoken communication and mutual understanding between the parties. While they may not be written down, they can still be valid and enforceable under California law. However, the statute of limitations for oral contracts is shorter, allowing for a two-year period to file a lawsuit from the date of any breach, compared to four years for written contracts.
Implied Contracts
Implied contracts are those that are not explicitly stated or written but are inferred from the actions or behaviour of the parties involved. These contracts can still be legally binding and enforceable. For example, long-term employment relationships with positive performance evaluations, regular pay raises, and promotions can lead to an implied contract, impacting an employer's ability to terminate the employee.
Employment Contracts
Employment contracts in California can be complex, as they can be formed through written, verbal, or implied agreements. At-will employment contracts are common, where an employer can terminate an employee with or without notice and with or without a reason. However, there are exceptions to this, such as union employees who have protection through collective bargaining agreements.
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Contract requirements
A contract is a legally binding agreement between two or more parties or entities involved in a deal or transaction. For a contract to be valid and enforceable in California, certain conditions must be met.
Firstly, all parties must enter into the agreement voluntarily. If any party can prove that they signed the contract under duress, coercion, or undue influence, the contract may be revoked by a court. Only parties who are legally and mentally competent and of sound mind can enter into a contract. Additionally, all contracting parties must clearly indicate their approval of the contract's terms for it to be binding and enforceable.
Secondly, there must be a "meeting of the minds". In other words, the parties must intend to enter into a contract and have the same understanding of the terms of the agreement. The contract should outline the legal rights and responsibilities of the parties involved, and it should concern only those things that the parties intended to include in the contract. The contract creates an obligation that must be performed by the contracting parties or risk liability or legal action for defaulting.
Thirdly, the agreement must be for a legal purpose. While both oral and written contracts that meet the necessary requirements are legally enforceable in California, certain types of agreements must be in writing to be enforceable. These include contracts where performance cannot be completed within a year, agreements for the transfer of real estate titles, marriage contracts, broker contracts, lender contracts, debt repayment contracts, sales agreements, and contracts that take over a year to complete.
It is important to note that a contract's statute of limitations refers to the amount of time one has to file a lawsuit from the date of the breach of contract. In California, the statute of limitations for written contracts is four years, while that of oral contracts is two years.
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Contract changes
Even after a contract has been signed, changes can be made. If you have added or subtracted work, substituted materials or equipment, changed the completion date, or made any other changes, you must note it in writing on a "change order" and include any price changes. Once a change order is signed, it becomes part of the original written contract.
In California, a contract is a written or oral agreement between two or more parties or entities involved in a deal or transaction that is legally binding. The contract outlines the legal rights and responsibilities of the parties involved and is intended to be enforceable by law.
For a contract to be valid and enforceable in California, all parties must enter into the agreement voluntarily. If one of the contracting parties can prove that they entered into the contract under duress, coercion, or undue influence, the court may cancel or revoke the contract. Only parties who are legally and mentally competent and of sound mind can enter into a contract. A contract signed by a minor or a mentally incapacitated person is not enforceable in California.
While oral contracts are legally enforceable in California, they can be challenging to prove in the event of a breach. Written contracts are generally preferred, as they provide a clear record of the terms agreed upon and are easier to enforce if there is a dispute.
In addition, certain types of contracts must be in writing to be enforceable in California. These include contracts for marriage, real estate transactions, debt collection, broker agreements, lender agreements, debt repayment, sales agreements, and agreements that take longer than a year to complete.
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Frequently asked questions
A contract is a written or oral agreement between two or more parties or entities involved in a deal or transaction that is legally binding. It outlines the legal rights and responsibilities of the parties involved and is intended to be enforceable by law.
In California, a written contract must be signed by all parties involved who are of sound mind and must clearly indicate their approval of the terms. It should also be specific about the materials to be used, the work to be done, the price, when payments will be made, and when the job will be finished.
Examples of contracts that must be in writing in California include real estate transactions, sales of goods over $500, debt collection, surety bonds, and contracts extending credit of more than $100,000.
The statute of limitations for written contracts in California is four years, while oral contracts have a two-year statute of limitations.
It is important to ensure that all agreements are put in writing and are properly drafted, legal, and enforceable. A written contract should be specific and include all relevant details such as materials, work, price, payments, and completion date. It should also have warnings and notices about the right to cancel and allowable delays.
