Comment: Re:Naive, because most investors (especially VCs). (Score 2) 438
And by law, for anything to be valid, it must be documented. If there is a verbal NDA, its not valid in court, unless there is audiotapes. Then again, that might not be the legal standard.
You're right, it isn't. Certain kinds of contracts are required to be in writing; they're defined under what's commonly known as the Statute of Frauds. Though there is no such single statute for the entire country (it varies by jurisdiction), the traditional categories are:
- Contracts in consideration of marriage. This provision covers prenuptial agreements.
- Contracts that cannot be performed within one year. However, contracts of indefinite duration do not fall under the statute of frauds regardless of how long the performance actually takes.
- Contracts for the transfer of an interest in land. This applies not only to a contract to sell land but also to any other contract in which land or an interest in it is disposed, such as the grant of a mortgage or an easement.
- Contracts by the executor of a will to pay a debt of the estate with his own money.
- Contracts for the sale of goods involving a purchase price of $500 ($50 in Alberta, Canada) or more (proposed Amended UCC 2-201(1) requires a writing for contracts for the sale of goods of a price of $5000 or more).
- Contracts in which one party becomes a surety (acts as guarantor) for another party's debt or other obligation.
In contracts covered by the Statute, it must be a written contract; an audiotape won't cut it (some courts are allowing electronic methods to count as "signed writings" in recognition of the progress of technology).
Outside of the Statute of Frauds, contracts need not be written to be enforceable (and yes, an oral or handshake deal is a contract). However, there's a caveat: while the contract exists and is binding, it may be difficult to prove without a writing (this is where your audiotape comes in). This is an evidentiary problem, though, not a contract problem; if you can provide evidence (audiotapes, witnesses, actions in performance, etc.) to convince the court of the existence of the contract, it is quite valid. Actually, you'd be surprised at just how much business is handled on a handshake (particularly in farming).