Are Oral Agreements Legally Binding?
Oral agreements are legally binding as long as they were made in good faith and you can prove it in court.3 min read
Oral agreements are legally binding as long as they were made in good faith and you can prove it in court. Any type of agreement, verbal or written, must be reasonable, conscionable, and equitable.
Challenges Associated With Oral Agreements
Despite the fact that most people associate contracts with printed, notarized documents, the law only requires a few types of contracts to be written on paper. Even so, contract law doesn't favor verbal agreements because they're difficult to prove and often stem from fraud.
Oral agreements present more difficulties than written contracts because they aren't clearly presented. A court cannot read specific items related to the contract because the verbal agreement is essentially hearsay and depends on the testimony of the contractual parties involved. Unless a contract is in writing, it's difficult, if not impossible, to dispel any defects in the agreement.
With oral agreements, one party might lie about the terms of the agreement in court, resulting in a scenario where one person says one thing and the other says another. In extreme cases, all parties might be dishonest about the agreement, creating a legal impasse.
Before a court can enforce a contract, there cannot be a valid defense to the enforcement, such as a minor defendant or lack of mental capacity. Regardless of whether a contract is written or verbal, it must have certain elements before a court will consider it valid. The parties entering into the agreement must also be free from duress or fraud.
The key elements of a legally binding agreement include:
- An offer and acceptance: One party proposing something that the other party agrees to.
- Consideration: Both parties give something up in exchange for the contract, resulting in a “meeting of the minds.”
- Performance: All parties have certain duties they must perform.
- Good faith: A party cannot enter into an agreement for the purpose of cheating the other party or breaking the law.
- Enforceability: The agreement must be enforceable by law, which can be difficult to achieve in oral agreements because parties may not agree on the terms of the contract.
Proving an Oral Agreement in Court
The most difficult challenge in enforcing a verbal agreement is simply proving its existence. There are, however, several ways to provide proof. For instance, you may have entered into an oral agreement with a contractor who provided a service. Having proof of payment such as a copy of the check you gave to the contractor is proof enough that some sort of deal was struck.
Witnesses also count as proof. If you had anyone present at the time of the oral agreement, they may be called as a witness. Any written communications about the agreement, including texts and emails, will also count.
The law is designed to prevent deceitful conduct, which is why certain types of contracts must be in writing. For example, the Uniform Commercial Code requires any contract for a sale of goods over $500 to be in writing.
Additional statutes require written contracts in these situations:
- Real estate transactions
- Real estate leases lasting one year or more
- Agreements to pay someone else's debts
- A property transfer after an owner's death
- Contracts lasting longer than one party's life
- Contracts involving a certain amount of money
- Contracts that will take longer than one year to complete
Still, an oral contract is enforceable if one party partially complied with all the terms or if the plaintiff relied on the defendant's failed promise and suffered as a result.
Unlike written agreements, verbal contracts aren't specific when it comes to the statute of limitations. Verbal contracts have shorter statutes of limitations because they require fresher witness testimony and evidence than written contracts. If you need to sue someone for not upholding their end of a verbal agreement, you'll need to do so as soon as possible.
Getting Legal Help for Oral Agreements
Although an agreement may have started out as a verbal contract, you can formalize the agreement in writing. Putting the agreement in writing will eliminate many problems associated with oral agreements and help protect all parties. You may want to hire a lawyer to draft or review the contract based on the original oral agreement to best protect your legal interests and rights.
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