Verbal Loan Agreement in Washington State: Is it Legal?
In Washington State, a verbal agreement can be legally binding for a loan, but it can also be a risky proposition. While a written contract provides concrete evidence of the terms and conditions of the agreement, a verbal agreement can often come down to a “he said, she said” situation in court if things go wrong.
The Washington State Uniform Commercial Code, which governs commercial transactions in the state, does not require a written agreement to create a valid contract. Therefore, a verbal agreement can create a legally enforceable obligation, including for a loan.
However, just because a verbal agreement can be legally binding does not mean that it is always wise to rely on one. A written agreement provides a clear understanding of the terms and conditions of the loan, including the amount borrowed, the interest rate, the repayment schedule, and any other relevant details. Without a written agreement, there may be misunderstandings or disagreements about these key terms.
Additionally, it can be difficult to prove the existence and terms of a verbal agreement in court. A written contract provides a clear record of the agreement, whereas a verbal agreement relies on the memories and testimony of the parties involved. In the absence of a written agreement, a court may look for other evidence of the agreement, such as emails or text messages, but these can be difficult to obtain and may not provide a complete picture of the transaction.
One way to protect yourself when entering into a verbal loan agreement in Washington State is to create a written record of the transaction. This can be as simple as writing down the terms of the loan in an email or text message and having the other party confirm their agreement.
Another option is to use a third-party platform that facilitates online lending, such as LendingClub or Prosper. These platforms provide a clear record of the loan terms and make it easier to enforce the agreement if something goes wrong.
In conclusion, while a verbal loan agreement can be legally binding in Washington State, it is generally advisable to use a written contract to avoid misunderstandings and provide a clear record of the agreement. If you do choose to rely on a verbal agreement, it is important to take steps to document the transaction and protect yourself in case of disputes.