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Oral Contracts

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What Is an Oral Contract?

Oral contracts are spoken agreements that are sometimes legally binding. The problem proving an oral contract is the lack of tangible evidence. Oral contract cases often rely on the performance of one or both parties that exhibits a clear reliance on the agreement.

Can You Sue for Breach of an Oral Contract?

Certain oral contracts are considered enforceable. Enforceable contracts are those which a legal remedy is offered if they are breached by either party.

When Are Oral Contracts Unenforceable?

Oral contracts are unenforceable if they fall under the Statute of Frauds which requires a written agreement for instances such as:
  • Marriage
  • Sale of goods above a certain value (varies by state)
  • Transfer of land ownership
  • Contracts that cannot be fulfilled within a year
  • Assuming the position of executor of a will
  • Becoming a surety for another party’s debt

Why Should I Form an Oral Contract?

Oral Contracts are at their best when they pertain to simple agreements, easily memorized, with plenty of evidence that such an agreement is in place. For example: Joe agrees to buy Jane a refrigerator if Jane gives Joe her television. Joe and Jane handshake on the agreement with their friends Bob and Xander as witnesses, then Joe keeps a receipt from the story he purchased the refrigerator from.

Why Should I NOT Form an Oral Contract?

Although oral contracts have their uses, there are situations where a written contract would be more advisable. These situations include, but are not limited to:

  • The other party asks for an oral contract only- If one party is persistent about not having a contract written down, this is a sign that good faith may not be on that party’s agenda.
  • The agreement is too complex to be written down- Written contracts are designed for complex deals. Oral contracts, in contrast, should be the simple ones.
  • Neither party has the time- Time should not be factors in such agreements.
  • Both parties trust one another- Contracts (and the law for that matter) are not about trust, but about clarity. Trust is created and maintained when all parties understand what is expected of them and follow through. Mistrust occurs when there is conflict over those expectations.

How Do I Form an Oral Contract?

Although it’s not the preferred method of operating, oral contracts can be considered valid if an agreement is made to buy, sell, or carry out some kind of service as a result of your statement and prior agreement. 

If you wish to form an oral contract, be sure that you can prove that such a contract was made. Having several witnesses, for example, can help establish that your contract exists. Likewise, physical evidence, such as e-mails, letters, receipts or even a thank you card, can count as evidence for your oral contract.

What Should I Do If Someone Breaches an Oral Contract?

The best remedy is contacting the other party to informally attempt to clear up the situation. If that doesn't work, you should consult a contracts attorney to understand your options for legal recourse.
Photo of page author Peter Clarke

, LegalMatch Content Manager

Last Modified: 09-13-2017 09:47 PM PDT

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