Litigation clients often have a difficult time understanding why their case is not a “slam dunk”—I call this the difference between “legal reality” and “human reality”.
Suppose you own a business, ABC, Inc. (“ABC”). You reach a verbal agreement with the President of XYZ, Inc. (“XYZ”) that XYZ will purchase widgets only from ABC for three years at $10 each, and that you can increase the price by 5% every January 1. You and XYZ prepare and sign a short written agreement that simply says that “XYZ will purchase all of its widgets from ABC at the price of $10 each.”
You later learn that XYZ has been purchasing widgets from another company. You decide that you want to sue XYZ for breach of contract. Morally you are right and should be able to recover damages from XYZ. That is the “human reality”. The “legal reality” is different.
The written agreement you signed does not mention the three year term, so you would have to rely on proof of XYZ’s verbal agreement to the three year term. However, there is the possibility that XYZ’s president will lie in court and deny that there ever was such a verbal agreement. Or he may simply recollect the discussion differently than you do. The court will then be in the position of have to decide which of you it finds more credible and whose testimony to believe.
Moreover, there is what is known as the “statute of frauds” rule. This rule says that any contract that cannot be performed within one year must be in writing. It was originally intended, as its name suggests, to minimize fraudulent claims of long term contracts. Because the three year contract term was not in writing, legally it is not enforceable so the court will bar you from presenting evidence of its existence. Because you are unable to prove the three year term, the contract therefore had no term and XYZ was entitled to terminate it at any time.
Next, suppose that XYZ does purchase widgets from ABC, and then on January 1 you increase the price to $10.50 each (the 5% increase). You deliver the widgets to XYZ and invoice XYZ. XYZ however refuses to pay the additional 5%.
Of course XYZ is morally obligated to pay you the additional 5%, but again human realty and legal reality differ. This is not only because of the risk of perjured or mistaken testimony as to the existence or terms of the verbal agreement, but also because of what is known as the “parol evidence rule”. Legally, the new $10.50 price is in direct conflict with the $10 price set forth in the written contract. If you sue XYZ, the court will refuse to allow you to present evidence of the verbal agreement, because the parol evidence rule bars presentation of verbal agreements or statements that directly conflict with the terms of a written agreement.
These are just a couple of examples of how legal reality differs from human realty, and why it is important not only to understand those differences when deciding whether to litigate your claim, but also to understand that any agreement should be memorialized in a properly prepared written contract.
Copyright 2012, The Law Office of Vincent J. Profaci, P.A., serving Altamonte Springs, Kissimmee, Lake Mary, Longwood (including Lake Brantley and Sweetwater), Maitland, Orlando, Sanford, and all of Central Florida in the areas of Wills and Living Trusts, Estate Planning, Asset Protection, Elder Law, Medicaid Planning, Probate, Real Estate, and Business Law and Litigation.