Arizona Contract Laws

Some verbal contracts are enforcreable in Arizona.
Some verbal contracts are enforcreable in Arizona. (Image: Jupiterimages/Comstock/Getty Images)

Arizona contract law is derived from two sources -- statutory law, and precedents set by Arizona courts in previous cases. Subject to complex legal restrictions, a contract may be governed by Arizona law if it involves subject matter physically located in Arizona, if the parties are from Arizona or if the parties agree that the contract is to be governed by Arizona law.

Offer, Acceptance and Consideration

An offer must be accepted according to its terms for a contract to be created. The only exception is the sale of goods under Arizona's version of the Uniform Commercial Code (UCC), which allows an acceptance with terms that add to or differ from the terms of the offer to nevertheless to form a contract. Both parties must give something of value to the other for a contract to be enforceable (this is known as "consideration"). Consideration can be a problem in some cases -- for example, if an employer signs a bonus agreement with a long-time employee without increasing the responsibilities of the employee, the contract is considered unenforceable because the employee provided nothing of additional value in return for the bonus.

Implied Duties

Arizona imposes the implied duties of good faith and fair dealing on every contract. These duties govern the interpretation of the contract. For example, if an employment contract prevents the employee from working for the employer's competitors after the termination of employment but does not specify the duration of the restriction, an Arizona court will probably not interpret that restriction to mean that the employee is forever prohibited from working for his former employer's competitors, because that would violate the employer's duty of fair dealing. Instead, the employee may be restricted for working for the employer's competitors for a reasonable period, such as one year ("restraint of trade" is another legal objection to broad non-compete clauses).

Statute of Frauds

The Arizona Statute of Frauds requires some contracts to be memorialized in a written instrument to be enforceable. Examples include real estate purchase contracts and the sale of goods for at least $500. Any contract not covered by the Statute of Frauds can be enforced even if it is verbal. However, if only the defendant signed the contract, the plaintiff may enforce the contract against him. A contract need not be represented by a unified document -- an exchange of emails, for example, can constitute a written contract.

Sale of Goods

Article 2 of the UCC governs the sale of goods. Under the UCC, a court is granted wide latitude to determine the terms of a transaction, even if these terms are not put into writing. For example, a contract for the sale of a shipment of television sets worth $10,000 must be in writing to be enforceable. Nevertheless, if the contract fails to mention specifications applicable to the television sets and the buyer attempts to evade payment by claiming that the seller did not meet specifications, the court is entitled to look at factors outside the written contract, such as the parties' prior course of dealing, to determine what specifications apply to the transaction.

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