Understanding the legal claim at the heart of the Tony Finau lawsuit

You’ve probably heard the old line, “An oral contract isn’t worth the paper it’s written on.” That’s true—except when it isn’t. That confusion is at the root of the tangled controversy between Tony Finau and the former friends who say they bankrolled his journey to stardom on the PGA Tour and who are now demanding a share of the millions Finau has made.

In rough terms, oral contracts—also known as “handshake deals”—must meet the same formal requirements as written contracts in order to be enforceable by the courts. There has to be an “offer” from one side of the deal and “acceptance” from the other, and there has to be an agreement on the terms, often called “a meeting of the minds.” If the terms of the deal are clear to both sides, then the contract is valid, regardless of whether the terms were reduced to writing. But that’s usually the rub when it comes to oral contracts. When terms are not spelled out in text, courts are reluctant to find that a meeting of the minds actually took place.

This is the heart of the problem with the cases against Finau and his family. The Utah businessman Molonai Hola claimed that in 2006 he invested $600,000 in Finau’s career in return for a promise of 20 percent of his future earnings—which today would amount to many million dollars. Hola said that Finau “agreed and understood” the terms, but the businessman acknowledged in his court papers that there was never a written agreement to that effect; Finau and his camp have said there was never any such deal. Especially with the passage of so much time, it’s very hard to prove the exact terms of an oral contract. In fact, after Hola sued to enforce his handshake deal with Finau, the Utah court threw out that claim because Hola had waited too long to sue; the breach of contract claim was barred by the statute of limitations. So, the court never even had to decide whether Hola and Finau had ever entered into a valid contact in the first place.

But the judge in Utah did not dismiss Hola’s entire lawsuit against Finau. The judge said that Hola’s complaint against Finau for “unjust enrichment” may eventually go to trial before a jury. Unjust enrichment is a legal doctrine that attempts, more or less, to enshrine the concept of rough justice. The idea is that if Person A gives a benefit to Person B, even if there is no formal contract between them, Person B should not unfairly benefit from the relationship. But the doctrine of unjust enrichment has strict limits. If Person A makes a gift to Person B, Person A can’t come back later and claim unjust enrichment by Person B. Here, of course, Finau is claiming that Hola made a gift when he put up money on the golfer’s behalf. Hola asserts that he was making an investment, not a gift, and now he expects a fair return. Again, without anything in writing between the parties, it’s hard to tell what deal really was.

The level of rancor between Finau and his erstwhile sponsors is unusual, but the relationship is not. Golf is a sport of individual contractors, and many aspiring pros need financial help to get their careers off the ground. Sometimes these benefactors simply want to give a helpful boost and share in the excitement of a possible professional career; at other times, they are looking for a financial return on a financial investment. The moral of the Finau story is clear. Whatever the terms of any sponsorship deal, it should be par for the course to get it all down in writing from the beginning.