Legal Memorandum: Verbal Agreement to Execute a Written Contract

Issue: In Alabama, is a verbal agreement to execute a written agreement enforceable?

Alabama’s top court stated:

A verbal agreement to execute a contract to be in writing, the terms of which are mutually understood and agreed upon, is in all respects as valid and obligatory as the written contract itself would be if executed, when no statute requires it to be in writing, and the agreement does not postpone its effect until the writing is signed.

Cowin v. Salmon, 13 So. 2d 190, 195 (Ala. 1943).  More recent cases confirm that this is still the law.  H.C. Schmieding Produce Co. v. Cagle, 529 So. 2d 243, 246-47 (Ala. 1988); Muscle Shoals Aviation, Inc. v. Muscle Shoals Airport Auth., 508 So. 2d 225, 227 (Ala. 1987).

Of course, not every single term, condition or detail need be agreed upon in the initial oral agreement—only the essential terms must be specified.  Thus, in Muscle Shoals the Alabama Supreme Court quoted with approval the following statement from a Texas court: “So, to be enforceable, a contract to enter into a future contract must specify all its material and essential terms, and leave none to be agreed upon as the result of future negotiations.”  Muscle Shoals, 508 So. 2d at 227 (quoting Radford v. McNeny, 104 S.W.2d 472, 475 (Tex. Comm’n App. 1937)).

However, as long as all essential terms were agreed to in the initial oral agreement the latter is a valid contract.  See J. Perillo, Corbin on Contracts § 2.9 (1993); E. Farnsworth, Farnsworth on […]