Monday, December 28, 2009
Can hiring managers create legally binding oral agreements?
I've been asked many times over the years whether a written contract is required between a hiring company and the temporary staffing agency before they engage in legally binding business transactions. The answer is no. While written agreements are preferable to avoid later confusion, nothing prevents the parties from entering orally binding agreements. At times, the hiring company needs to move fast, faster than its legal department can move. The law's quite clear oral agreements are enforceable. But I would suggest, even in the absence of a traditional written agreement caught up in the legal department, the parties should exchange emails which state basic terms such as duration of contract, conversion terms, rate of pay, and payment terms. Hiring managers should be careful to hammer out these crucial details by email at a minimum with the temp agency's representative. In the event of a dispute regarding payment terms, or whether a contract (oral or written) was entered into at all, the law recognizes the hiring company is not allowed to be "unjustly enriched." As applied to temporary staffing, this means the hiring company would likely be obligated to pay the reasonable rate for the services provided by the contractor/resource - even in the absence of an oral or written contract. Typically, the parties work these matters out well in advance, and neither party wants to burn a relationship, but it's good to know for future reference.
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