Oral Contract Requirements

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What Are the Requirments for an Oral Contract?

An oral contract is a legally binding agreement made verbally between two or more parties. The basic requirements for forming a valid oral contract are no different from the requirements for forming a valid written contract. These requirements include:

  1. An offer
  2. Acceptance to the offer
  3. Consideration

In some cases, a contract agreement will not be valid unless the terms of the agreement are in writing. See below for more details.

What Is an Offer?

An offer is a promise or set of promises to do something or refrain from doing something. For instance, an offeror may promise to buy a vehicle or not work for anyone else during a term of employment. A party called an offeror makes this promise to a specific person. With an oral contract the promise is usually made verbally.

What Is Acceptance?

The offeror is not legally bound to fulfill the promise made in the offer until the specific person accepts the offer. The person accepting the offer is called an offeree. The individual accepting the offer can give verbal or implied acceptance.

What Is Consideration for an Oral Contract?

Consideration is the exchange of promises between each party. For example, Mark offers Henry $3,400 to buy his living room set. In exchange for the money, Henry promises to give Mark the living room set.

Consideration makes an oral contract legally binding. This means each party has the right to sue in court because they relied on the promises made in the oral contract. Types of consideration include:

When the parties have all oral contract requirements, they typically have an enforceable contract.

When Must a Contract Be in Writing?

Oral contracts are not enforceable when they are in the category of Statute of Frauds. Statute of Frauds requires certain agreements to be in writing which include contracts for:

Should You Hire a Contracts Lawyer?

An oral contract is enforceable and breaking the terms to an oral contract agreement would constitute a breach of contract. Legal disputes between parties often focus on what each party said when making the agreement.

Before making an oral contract, contact a business lawyer to understand your rights. If you are involved in a breach of contract dispute, you should contact a lawyer to prove representation for your side of the dispute.

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Last Modified: 12-29-2015 04:38 PM PST

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