Verbal agreements – unlike signed contracts – are not legally binding.
When I’m asked by a client to review a contract – whether it’s an employment contract, a partnership agreement, an operating agreement or a buy/sell agreement – it’s very important to ensure that all terms verbally agreed to are included in the contract.
For example, parties may verbally agree to the following terms when discussing an employment contract, however, the written contract may not include everything agreed to:
- vacation time;
- work hours and on-call schedule;
- office locations;
- malpractice insurance coverage;
- disability and health insurance;
- continuing education reimbursements.
An employer may seek and find a new, young doctor, who’s completed a residency program and desires to employ him/her. The employer will approach the doctor, discuss the benefits of joining their practice and how the doctor can thrive in this office environment.
The doctor, often excited to start working after having been in school for so long, may not ask the right questions to legally protect themselves. He/she may not know what they have a right to, or what the employer would be willing to offer in order to have the doctor work for them.
The employer will try to entice the doctor as much as possible to get him/her to commit, upon which they will probably shake on it, indicating, “That sounds like a great idea. Let’s put this into a contract,” and that’s it.
There’s no recording, and counsel is generally not present. Often times it is a casual conversation that’s exchanged between the parties.
Back in the day, a handshake was enough; people stood by it, and it solidified an agreement. Changes in law and our society have transformed that. Verbally agreed upon terms must be placed in a written contract to make them binding. If not, the doctor will have no protection and will not be able to enforce the terms that were verbally agreed upon.
Having all the terms in a contract can reduce the amount of potential future issues between the parties. If an issue arises during the term of employment, parties should be able to refer to the contract to resolve it, smoothly and easily, so they can continue the working relationship without issue.
That’s the role I play when I review contracts: Ensuring my client is protected to the utmost extent based upon the verbal agreements and what they want their experience to be, whether it’s joining a partnership, an LLP/PLLC, or becoming an employee of a practice.
Stephanie J. Rodin, Esq.
Rodin Legal, P.C.
Tel: (917) 345-8972
Fax: (917) 591-4428