Are Oral Contracts Valid?

Are Contracts Valid Even If They Aren’t Written Down?

Video by Attorney Kevin O'Flaherty
Article written by Illinois & Iowa Attorney Kevin O'Flaherty
Updated on
October 28, 2019

In this article, we will examine whether or not contracts must be written down to be considered valid, as well as what types of contracts must be in writing in order to be enforced. We will specifically look at “Are Oral Contracts Valid?”, “Difficulty Proving Oral Contracts” and “Contracts That Must be in Writing.”

Are Oral Contracts Valid?

Yes, oral contracts are generally considered just as valid as written contracts, but it does depend on the jurisdiction and type of contract. For an oral contract to be valid, it must contain these three elements: an offer, an acceptance of that offer and consideration in which each party receives something of value through an exchange to serve as the purpose of the contract.

An oral contract is generally used in more informal agreements, where there’s mutual consent in an arrangement of providing and then receiving goods and services. As such, oral agreements are common among long-time traders and business partners who have a previous business relationship.

To answer the question in short: yes, oral contracts are valid. However, the legal obstacle comes to proving an agreement was made between two parties and can, therefore, be enforced.

How to Prove an Oral Contract

While oral contracts are valid, they are not favored under contract law. This is because it’s much more difficult to prove an agreement exists and the tendency of both parties is to cheat in some way.

There are three main factors in proving the validity of oral contracts:

  • witness testimony,
  • course of conduct, and
  • credibility.

For witness testimony, another person or multiple must be able to prove they were present when the terms of the contract were agreed upon. Meaning, there must be some kind of physical proof to indicate they witnessed the verbal contract, rather than just saying they were aware of the contract. Therefore, this can be somewhat difficult to prove.

Course of conduct refers to a proven and accepted history of the two parties that formed the alleged contract. This means that evidence showing both parties acted in a way according to the terms of the agreement can be seen as course of conduct. An example of such evidence could be a history of paid invoices by one party for the exchange of services by the other party.

Credibility of the parties is the final factor a court looks at when determining the validity of oral contracts. This refers to the parties’ ability to prove that an individual action or statement from either party was credible or not credible.

Without proof of these three factors, it is very difficult to prove an oral contract was agreed upon. Without concrete evidence of witness testimony, course of conduct and credibility, a court will most likely not deem an oral contract enforceable.

Do I have to sign a contract

Contracts That Must be in Writing and the Statute of Frauds

There are a number of contract types that are required to be in writing in order to be enforced.  In legal terminology these types of contracts fall within the “Statute of Frauds.” The situations requiring a written contract include:

·     An agreement involving the payment of the debt of another person;

·     When contracts have a longer longevity than a person’s life named in the contract;

·     Leases of property lasting over one year;

·     Contracts that involve a work period longer than one year;

·     A contract with a value of a specific amount (the amount varies by state-to-state);

·     Sale of real estate;

·     Transfer of property when the owner dies;

·      An agreement made by the executor of another party’s estate;

·     Any contract for the sale of goods totaling more than $500.

If a dispute arises for any of the above situations and it goes to the court and only an oral agreement was made, the court will not enforce the contract. When entering into contracts – especially if it’s being determined whether the contract should be in writing or verbal – it is of the utmost importance that both parties understand the legal requirements for both kinds of contracts.

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How to Prove an Oral Contract

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