When Allstate did not honor the agreements, Carter and Thomas filed a suit for breach of contract. Discuss the enforceability of the oral agreement.

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When Allstate did not honor the agreements, Carter and Thomas filed a suit for breach of contract. Discuss the enforceability of the oral agreement.

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Jesse Carter and Jesse Thomas had an auto accident with a driver insured by Allstate. Carter and Thomas hired attorney Joseph Onwuteaka to represent them. Mr. Onwuteaka sent a demand letter for settlement of plaintiffs’ claims to Allstate’s adjustor, Ms. Gracie Weatherly. Mr. Onwuteaka claims Ms. Weatherly made, and he orally accepted, settlement terms on behalf of the plaintiffs. When Allstate did not honor the agreements, Carter and Thomas filed a suit for breach of contract. Discuss the enforceability of the oral agreement.

Explanation & AnswerSolution by a verified expert

Explanation

If Company A was merely a surety, its obligation would have been to pay its insured person's debt by default. However, as an insurer, Company A, had a contract with its insured person to assume responsibility for the liability, at least to the limits of the insurance policy. Company A's verbal agreement to settle, may resolve not only its insured person's potential liability but the company's own possible obligation to pay and its own duty to defend its insured person. The verbal agreement to discharge may be an original settlement, not a pledge to answer for the dues of the insured. Accordingly, the sponsorship provision of the Council of Frauds may not apply to Company A's pledge to settle the agreement.

Sample Response

The petitioner may assert that the claimed verbal document may not be governed by the Council of Frauds. Allstate may claim that the Law of Frauds may be applicable to the presumed document under the terms of collateral, which may allow the pledge by another person to acknowledge the dues, non-payment, or setbacks of another person.
 
An assessment for evaluating whether the assertion to pay the dues of another may be within or outside the Law of Frauds may depend on whether the promisor is a sponsor, who may be only secondarily accountable or has accepted the primary responsibility for the debt. If the party is primarily answerable, its pledge to pay the dues may not be required in writing by the Council of Frauds. Although, if the party is a sponsor, the guarantee to pay the debt of a third party may be required in writing.

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