The Case for Putting it in Writing

In prior blogs, I’ve emphasized the need to get any agreement in writing. A recent court of appeals case, shows what happens when you reply on oral agreements.

The case, Catz Enters. v. Valdes, 2009 Ohio 4962, involved two checks given by one party to the other totaling $20,000. The checks were written on July 8, 1991. As alleged by the creditor, the payments were a loan to the debtors. He continued to demand payment, writing several letters to the debtors demanding payment through April 7, 2006 when the he finally filed suit. The creditor claimed there was an oral agreement calling for the debtors to repay the loan by September 6, 1991. He further alleged that the statute of limitations for filing suit was extended by his oral and written demands for payment. The debtors denied there was a loan.

Written in Ohio statutes are various “statutes of limitation” setting forth the time by which a party must take action against another for any alleged wrongdoing. For example, an action based on negligence (a car accident, for example) must be filed within two years. In the case of contracts, the statute of limitations on a written contract is 15 years. The statute of limitations on an oral contract is 6 years.

As stated by the court, “the statute of limitations on oral contracts is six years and ...The six year statute of limitations may be extended [only] if there is a writing, signed by the charged party, acknowledging the debt or promising to pay it, O.R.C. 2305.08.”

Since the creditor could produce no written document signed by the debtors acknowledging the debt or extending the terms of the agreement, the statute of limitations ran on September 6, 1997 (6 years from the date the loan was allegedly due). Therefore, the creditor could not enforce the debt because the statute of limitation had run.

So, we have a prime example of the consequences in relying upon an oral agreement. What is also apparent is the fact that the debtors denied there was even a loan. Therefore, the terms of the alleged agreement were even in controversy. Had the creditor obtained a document, signed by the debtors acknowledging the loan, the outcome may have been different.

The obvious – get any agreement in writing, signed by both parties.