Key Takeaways

  • Verbal contracts are legally binding in most cases, provided they meet core elements of contract law.
  • Certain types of agreements are required by law to be in writing under the Statute of Frauds.
  • Enforcing verbal agreements can be difficult due to lack of written evidence.
  • Performance, witnesses, and related documentation can help support the existence of a verbal contract.
  • Several states place specific limitations or requirements on verbal agreements.
  • Verbal contracts may not be ideal for complex or high-value transactions.
  • Legal guidance is recommended when entering or disputing verbal agreements.

People commonly wonder, "Are verbal contracts binding?" Verbal contracts and agreements are typically legally binding if they are reasonable, fair, and made in good faith. Even though most people associate contracts with written documents that must be signed, very few contracts are actually required to be written to be valid.

Enforcing a Verbal Contract

One of the main reasons verbal contracts are approached with caution is they are much harder to enforce than written contracts. A written document can clearly be presented as evidence in court. However, if a verbal contract is brought to court, there is always a chance that one party is lying. If both parties lie about a contract, it creates a legal impasse for the court.

As long as a verbal contract is rational and conscionable, it is valid. An example of this is if you borrow a car from a friend. There is an expectation that you will return the car in good working order. Your friend doesn't make you sign a document saying you will return the car without a scratch, but the agreement is understood with words and the action of your friend giving you the keys.

Although most verbal contracts are legally binding, there are occasions where that is not the case. If a contract isn't constructed properly or doesn't have a legal purpose, it will not be binding.

Limitations of Verbal Contracts

While verbal contracts are generally enforceable, they are not without limitations. Under the Statute of Frauds, certain types of agreements must be in writing to be legally valid. These typically include:

  • Contracts involving the sale of land or real estate
  • Agreements that cannot be completed within one year
  • Promises to pay someone else’s debt
  • Contracts involving marriage as consideration
  • Contracts for the sale of goods over $500 (under the UCC)

Failing to document these types of agreements in writing can render the contract unenforceable, even if both parties verbally agreed.

Non-Verbal Contracts

Taking it a step further, some contracts don't even have to be written or spoken to be valid. Implied contracts happen every day. When you go into a store and make a purchase, you are receiving goods in exchange for money. The agreement is implied as soon as you take your items to purchase to the cash register.

When Verbal Agreements Become Risky

Verbal contracts can lead to misunderstandings or disputes when the terms are unclear or the agreement is complex. High-risk situations include:

  • Employment contracts with detailed obligations
  • Agreements involving large sums of money
  • Long-term service or leasing arrangements

Because there is no written document to reference, disputes often devolve into conflicting accounts, making it harder for courts to determine the true intent or terms of the agreement. In such cases, even minor discrepancies can undermine a claim.

Requirements for a Binding Contract

Even though verbal contracts are difficult to enforce in court, both parties should discuss enforceability. Adding the following elements to a verbal contract can improve its validity and enforceability:

  • Mutual consent and understanding, which means both parties involved are aware of what they are agreeing to. If you hire a landscaper to work on your yard, both parties should understand what kind of work is included and what the cost will be.
  • Offer and acceptance, which happens when one party offers something and the other party accepts and agrees to the conditions.
  • Mutual consideration, which means that valuable goods or a service must be exchanged.
  • Performance, which means that both parties are obligated to perform the duties they've agreed to.
  • Good faith, which means both parties agree to not break the law or try to cheat the other party.
  • Lawful purpose, which states the purpose of the contract must be lawful. Even if a verbal contract meets all the other requirements, if it is a contract to do something illegal like steal a diamond ring, it is considered invalid and unenforceable.
  • Lawful consideration, which means money or something else valuable must be exchanged between the parties. Whatever is being exchanged must be legal. For example, exchanging money for a service is legal, but exchanging illegal drugs for the same service creates an unenforceable contract.
  • Certainty of terms, which states that a contract's terms have to be clear and complete. Terms cannot be vague or easily misrepresented.
  • Free consent of the parties, which means that both parties are of sound mind and freely agree to the terms of the agreement. One party can't be coerced into agreeing to something.

State-Specific Rules on Verbal Contracts

While most states in the U.S. recognize verbal agreements, some impose additional rules. For example:

  • California: Verbal contracts are valid but certain agreements must be in writing under state law.
  • New York: Enforces the Statute of Frauds strictly for real estate and one-year-plus agreements.
  • Texas: Allows verbal agreements but emphasizes the importance of “performance” to establish enforceability.

State laws may also vary on statutes of limitations for filing claims based on verbal contracts, which typically range from 2 to 6 years depending on the jurisdiction.

Burden of Proof

One of the difficulties of verbal contracts is that it is hard to overcome the burden of proof if the issue is ever brought to court. However, this can be fixed if there is any proof that the contract was followed. One way this can be done is if the plaintiff presents evidence of one party performing their responsibilities of the contract, such as a person mowing the lawn that they verbally agreed to do.

If there is proof of payment, such as the other party paying the agreed-upon $20 for mowing the lawn, that can also prove that there was a verbal agreement. A person who was present when the verbal agreement was made can also serve as a witness to verify that there was indeed a valid agreement.

How to Support a Verbal Agreement in Court

To support the validity of a verbal contract, courts will consider various types of evidence, including:

  • Witness Testimony: Individuals present during the agreement can confirm what was said.
  • Correspondence: Emails, texts, or voicemails that refer to the agreement.
  • Invoices and Receipts: Documentation that shows payment for services or goods.
  • Performance Evidence: Actions by one or both parties that indicate a mutual understanding of contract terms (e.g., one party delivering goods, the other making payment).

Courts will assess this evidence alongside behavior, consistency, and credibility of each party. When direct proof is unavailable, circumstantial evidence can still carry weight.

Best Practices for Verbal Contracts

While verbal contracts can be legally binding, it is wise to take steps that reduce ambiguity:

  • Follow up in writing: Summarize terms via email or text after the conversation.
  • Keep records: Retain any proof of payment, delivery, or performance.
  • Ask for witnesses: Have a third party present when making agreements.
  • Use written contracts for high-stakes deals: Even a basic written summary signed by both parties can prevent legal issues.

Whenever possible, transitioning from a verbal agreement to a simple written agreement helps minimize the risk of disputes.

If you're unsure whether your verbal agreement is enforceable, you can find a qualified attorney on UpCounsel to review your situation and protect your legal interests.

Frequently Asked Questions

Are verbal contracts binding in all states? Most states recognize verbal contracts, but some types of agreements (e.g., real estate, long-term commitments) must be written under state law.

How do I prove a verbal contract exists? You can provide evidence such as emails, payment records, witness testimony, or actions that show both parties acted on the agreement.

What makes a verbal contract legally binding? It must include offer and acceptance, mutual consideration, lawful purpose, and agreement by parties capable of contracting.

When is a written contract required by law? Written contracts are required for agreements covered under the Statute of Frauds, including those involving real estate or lasting over one year.

Can I sue someone over a verbal agreement? Yes, if the verbal contract meets legal requirements and you can provide sufficient evidence, you may bring a claim in court.

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