If I make an oral agreement, can I later terminate the agreement without penalty if I find out their business license is not current?

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If I make an oral agreement, can I later terminate the agreement without penalty if I find out their business license is not current?

We hired a lawn maintenance person with the understanding our agreement was for month-to-month service. He claims we have an annual contract and cannot back out despite financial hardship. In addition to questioning the legality of the contract as a whole, especially since the terms were never disclosed before we supposedly agreed. We have since discovered that his business license expired last year and are curious if that makes any difference in his ability to legally make or enforce contracts.

Asked on March 28, 2012 under Business Law, Utah

Answers:

MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Sometimes some states enforce the issue of business licenses and some states do not. Contact the office of the secretary of state in your state to see if he has filed annual reports or see if this is a sole proprietorship and his trade name is still valid. Then, make him understand that a verbal contract in this situation is not enforceable because there are no specific terms, it won't be complete within 1 year and the issue is for services for which you were given fraudulent facts (business license expiration). You have every right to cancel. Unless he can show some  sort of enforceable agreement, he really can at most claim one month.


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