LITTLE ROCK — Even though some attorneys say they can be hard to enforce if a dispute arises, oral contracts are used by cities of all sizes for a wide variety of reasons, ranging from small amounts of money to trusted relationships.
Little Rock has such an arrangement with the William J. Clinton Foundation to mow and maintain the 28 acres of parkland near the presidential library. The capital city has paid the foundation $206,575 a year since 2007 to maintain the park but never signed a written agreement that agrees the payments for the work.
City officials say the arrangement works because it's cheaper to have the foundation oversee maintenance rather than use the park staff and because they have a good history with foundation officials. City directors have approved the payments each year through passing the annual budget, but nothing guarantees an ongoing arrangement.
Oral agreements aren't unique to Little Rock.
Mark Hayes, an attorney for the Arkansas Municipal League, said he's seen "probably hundreds of circumstances, if not thousands where there have been forms of oral contracts or oral agreements" between cities and other parties from as big as "housing of jail prisoners to as small as mowing the city hall's front yard, and anything and everything in between."
While "it's smart to get things in writing," Hayes said, cities aren't doing anything wrong by using oral contracts.
"All of it, to me, is really related to the personalities involved and the levels of trust involved," he said, adding that he saw nothing about Little Rock's presidential park maintenance agreement that was a red flag.
Several Arkansas city and county finance directors, purchasing agents or attorneys contacted reported their cities as having no oral contracts, but then said they might not know about them, since they're not in writing.
Not all oral contracts pass unnoticed. This month, across the state line in Tennessee, Memphis' interim mayor fired an attorney representing the city in disputes over Beale Street after criticizing the nearly $2 million in payments made to the lawyer over five years through a verbal agreement even though the city has its own legal staff.
Some oral agreements don't involve money changing hands.
Across the river, North Little Rock has supported community events such as the Susan G. Komen Race for the Cure through use of city property or staff without any written agreements.
"It would slow down government so much if we had to have everything in writing and we wouldn't ever get anything done," said Joe Smith,North Little Rock's commerce director.
He said North Little Rock had until recently helped with race-day work without a contract but has since put the agreements in writing at the request of the organization. Smith said the group wanted something in writing to help keep track of supporters.
Often a city's written contract is spurred by the bidding process required for purchasing items or professional services valued over a certain amount - $20,000 for first class cities, under Arkansas Code Annotated 14-58-303.
In Little Rock's case, the 2002 lease agreement the city has with the Clinton Foundation for the library specifies the city will maintain the park. City Attorney Tom Carpenter said Little Rock is fulfilling its lease by making the foundation responsible for the actual maintenance, which it then hires out.
None of the cities contacted, including Little Rock, reported having any policies on how to deal with or enter into oral contracts.
Little Rock could not cite another example where the city pays out thousands of dollars without a contract, but Finance Director Sara Lenehan said the city has supported the Arkansas Arts Center and the Arkansas Museum of Discovery with subsidies that are agreed to in letters and not official contracts.
Various fraud statutes, such as Arkansas Code Annotated 4-59-101, require certain contracts or agreements to be in writing to be enforceable - marriages, real estate transactions, work that can not be performed in one year, for example. So do sales of goods over $500.
"If the contract is not one that a statute specifies has to be in writing, an oral contract is perfectly binding.Of course, the parties might then have difficulty in proving that they really have an oral contract, and might run into some issues proving what its terms were," said Mary Elizabeth Matthews, a law professor at the University of Arkansas' School of Law in Fayetteville who teaches contract law.
Matthews said that although oral contracts are common, they're less beneficial than a written one "unless maybe you want some ambiguity or lack of clarity."
"Usually people enter into an oral contract because the transaction is so small that it's not worth the cost of hassling out all of the terms and putting it in writing, or they are not adequately advised by counsel to put it in writing and they do it informally," she said.
There can be advantages to an oral contract.
"One of the advantages might be that if you're afraid that you might not agree on the tiny technical terms and you don't think they're ever going to come up, you can just go ahead and enter into your oral agreement and hope it never becomes an issue," she said.
Speed is another factor for cities that consider oral contracts, Hayes said.
"We all sort of agree on something, let's get going and probably the next day somebody is doing something," he said.
If a dispute ever did rise, a city likely would have to go to court to enforce its oral contract, he said. That's where documentation would help prove an oral contract, he said.
Front Section, Pages 1, 5 on 09/22/2009