Allison Harrison
July 31, 2023

Are Oral Contracts Enforceable?

While most people are familiar with written contracts, there is often confusion surrounding the enforceability of oral contracts. Let’s talk about when oral agreements might be enforceable. 

An oral contract is an agreement made verbally between two or more parties, without any written documentation. While oral contracts may be commonly entered into in everyday life, their enforceability can vary depending on the jurisdiction and the specific circumstances surrounding the contract. The law recognizes that oral contracts can be binding and legally enforceable, provided certain conditions are met.

The key elements required to establish the enforceability of an oral contract are as follows:

·      Mutual Agreement: There must be a meeting of the minds between the parties involved. This means that all parties must understand and agree upon the essential terms and conditions of the contract. Without mutual agreement, there can be no valid contract, whether oral or written.

·      Offer and Acceptance: Any contracts, including oral ones, require an offer by one party and a valid acceptance from the other party. The offer should be clear and unambiguous, and the acceptance should be communicated effectively.

·      Consideration: For a contract to be enforceable, there must be an exchange of something of value between the parties. This is known as consideration and shows that the parties intended to create a legally binding agreement. Consideration can be money, goods, services, or a promise to do or refrain from doing something. 

·      Statute of Frauds: One critical aspect to consider is the Statute of Frauds, which exists in many jurisdictions. This statute requires certain types of contracts, to be in writing to be enforceable. However, it is important to note that the Statute of Frauds does not invalidate all oral contracts, but that it serves as a defense against enforcement in specific situations.

·      Performance: If both parties have fulfilled their obligations under the oral contract, it strengthens the case for enforceability. Actual performance can demonstrate the existence and terms of the contract, even without a written record.

Despite the general enforceability of oral contracts, they often present evidentiary challenges in legal disputes. The lack of written evidence can make it difficult to prove the terms of the agreement, leading to disputes and conflicting claims. In such cases, it often becomes a matter of one party's word against the other's.

To mitigate these challenges, it is advisable to have a written contract when possible. A written contract provides clarity, reduces the risk of misunderstandings, and offers better enforceability. It is generally considered good practice to have written contracts for significant transactions or agreements, even when oral contracts may be enforceable.