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If I'm writing a sentence such as:

"I was talking to Alison the other day she said 'I like your shirt!'" Lisa commented.

Here Lisa is quoting Alison, how should Alison's speech be punctuated? I've used a single quote - is this correct?

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I tend to use single quotes for all my dialogue: 'I was talking to Alison.' So then when I want to have a character quote someone the quote is wrapped in quote marks: 'I was talking to Alison the other day and she said, "I like your shirt".' This is one of those classic situations where it can go either way, I read as many authors who write my way as who write the other. Of course, as lea points out, this would read more naturally as 'I was talking to Alison the other day and she said she liked my shirt.' –  CLockeWork Jun 26 at 8:43
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@CLockeWork Using single quotes for dialogue or double seems to be a function of where you live. The U.S. uses double quotes (so single on the inside) and Brits do the opposite. They're both right as long as you're consistent. –  Lauren Ipsum Jun 26 at 9:56
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@LaurenIpsum, I hadn't realised that but thinking about it makes sense; I just finished reading a book by Brandon Sanderson (American, double quotes on the outside) and now I'm onto a Charles Stross (British, single quotes on the outside.) I learn something new every day :D –  CLockeWork Jun 26 at 10:17
    
@CLockeWork I'd never even noticed that - I'm British and always use double quotes! –  Liath Jun 26 at 10:17
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Good call @Liath, I tend to get most of my Fantasy from Americans, and my Sci-Fi from Brits. Not sure why. –  CLockeWork Jun 26 at 10:28
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As long as you use two different sets of quotation marks readers should easily be able to follow the conversation. However, I think it would be more correct and more readable if you added a comma before the inner quotation.

Of course, you could always avoid the dilemma by having Lisa describe Alison's words to her rather than recite them verbatim, "she told me" rather than "she said". This may also be more naturalistic, but that depends on Lisa's manner of speech.

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+1 for the comma and for the alternative to quoting :) –  CLockeWork Jun 26 at 8:40
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If you're using American English, your sentence is like:

"I was talking to Alison the other day she said 'I like your shirt!'" Lisa commented.

That means add single quotes inside the double quotes.

Another example:

"So I was walking with Chris," said Nick, "and he said 'Madison's having a party.'"


If you're using British English, your sentence is like:

'I was talking to Alison the other day she said "I like your shirt!"' Lisa commented.

That means add double quotes inside the single quotes.

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