Story Case

Henry Davis, a private banker, said to George Hale, one of his salesmen, "George, if you will work the balance of this year on your present salary, and sell as many bonds during the next six months as you have during the past six months, I will agree to make you a partner in the business, giving you a one-fifth interest, and I will also continue your present salary." Hale answered that this arrangement was satisfactory to him. He worked faithfully until the end of the year, and was as successful in his sales as he had been during the first six months. Davis, however, refused to do as he had promised, and stated that his promise was not enforcible because it was not in writing. Is this correct?

Ruling Court Case. Austin Vs. Foster, Volume 9 Pickering's Reports, Page 341

Austin was the warden of a state prison. He had under his charge and supervision many convicts. Foster was a cabinet maker in the same city where the prison was located. Being in need of labor, he went to Austin to engage some convicts to do certain work for him. They came to an agreement by which Foster was to have thirty convicts for a certain period, for which he was to pay a certain sum each day for each convict taken with him, although none of the terms of their agreement were reduced to writing. In pursuance of this contract, Foster took away with him thirty men who worked for him about two months. At the end of this time he sent them back and refused to pay anything for their services.

In the state of Massachusetts there was a statute which provided that all contracts made in reference to the state prison should be made with the warden and that he, the warden, may sue and be sued upon such contracts. The warden, Austin, brings this action under the provisions of the statute, just referred to, to recover compensation for the use of the convicts during the two months that they were engaged in working for Foster. Foster maintained that no action could be brought, because the contract was not in writing.

Decision

At common law, in the absence of a statute providing a contrary form, no contract need be in writing. Contracts made by word of mouth were as binding as contracts made in writing. This statute, which gave to the warden of the state prison the right and power to contract in reference to the state prison, did not say that such contracts should be in writing. The result is that the common law rule still prevails in such a case. Therefore, the contract is binding, even though it is not in writing.

It was, therefore, held that the plaintiff, Austin, might recover the amount due for the services of the convicts.

Ruling Law. Story Case Answer

For the most part, an oral contract is just as valid and as a contract in writing. There are a few particular contracts, which as will be seen later, must be put in writing in order that they may be enforced in courts. With these few exceptions, however, contracts by the common law were not required to be reduced to writing. But an oral contract is often very difficult to prove, and for that reason, all contracts should be reduced to writing.

In the Story Case, if no one were present, except the two persons, when Davis made his promise to Hale, the latter might have difficulty in proving the contract, if Davis denied absolutely its existence. An oral contract, however, is good, and is binding on Davis. If he does not deny its existence and makes as defense merely the lack of writing, Hale can collect from him for breach of contract.