Key Takeaways:

  • Oral agreements can be legally binding, but proving them in court is often challenging.
  • Certain contracts, like those for real estate or over $500 in goods, typically require written documentation under the Statute of Frauds.
  • Oral contracts are valid if they meet the same criteria as written ones: offer, acceptance, consideration, and lawful purpose.
  • Performance, witness testimony, and electronic communications can help establish proof.
  • Oral agreements carry increased risks due to misunderstandings, misremembered terms, or deliberate misrepresentation.
  • Inconsistent state laws and short statutes of limitations can complicate enforcement.
  • It’s advisable to document oral agreements in writing to prevent disputes.

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.

Limitations of Oral Contracts Under the Law

While oral agreements may hold legal weight, certain limitations restrict their enforceability. Under the Statute of Frauds, many U.S. states require specific types of contracts to be in writing, such as:

  • Contracts involving the sale of real estate
  • Agreements that cannot be completed within one year
  • Promises to pay another person’s debt (suretyship)
  • Prenuptial agreements or marriage-related promises
  • Contracts for goods over $500, as specified by the Uniform Commercial Code (UCC)

If an oral agreement falls into one of these categories, a court may refuse to enforce it unless it is documented in writing. Even outside of these categories, courts may scrutinize oral contracts more critically due to their lack of clarity and higher potential for disputes​​.

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.

Factors That Help Validate an Oral Agreement

To strengthen the enforceability of an oral agreement, courts consider the following supporting factors:

  • Conduct of the parties: If both parties began fulfilling their obligations, it supports the existence of an agreement.
  • Performance evidence: Partial or full performance, such as services rendered or goods delivered, may demonstrate contract terms.
  • Documentation: While the agreement itself isn’t written, surrounding communications—emails, text messages, voicemails, or even receipts—can serve as corroborating evidence.
  • Witnesses: Any neutral third party who observed the agreement or the parties’ conduct can testify to support claims.
  • Reliance and detriment: If one party relied on the agreement and suffered losses because the other party didn’t uphold their promise, courts may consider it under the doctrine of promissory estoppel​​.

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.

Best Practices for Handling Oral Agreements

Given the inherent risks in oral contracts, consider these best practices:

  • Follow up in writing: After a verbal agreement, send a confirmation email summarizing the terms discussed. This helps create a paper trail.
  • Request signatures: Even a simple memorandum or digital acknowledgment (e.g., via email or text) can support the existence of the contract.
  • Document actions and payments: Save receipts, bank statements, and service logs tied to the verbal deal.
  • Avoid complex verbal arrangements: The more detailed or long-term the contract, the more important it is to have written documentation.
  • Use witnesses when possible: Having someone present during the agreement can help in case disputes arise.

To avoid potential legal complications, consider consulting an attorney before relying on an oral agreement. You can connect with experienced lawyers through UpCounsel to ensure your interests are protected.

Frequently Asked Questions

1. Are oral agreements legally binding in all states? Most states recognize oral agreements as legally binding, but some require certain contracts—like those involving real estate or long-term commitments—to be in writing.

2. How do I prove an oral agreement in court? You can use witness testimony, documented actions (like payments or deliveries), and any related communications like emails or texts to support your claim.

3. What happens if one party denies an oral agreement? If there is no supporting evidence or witness testimony, it becomes a matter of credibility. Courts may find it difficult to enforce the contract without corroboration.

4. What types of contracts must be in writing? Under the Statute of Frauds, contracts involving real estate, marriage, suretyship, or those that cannot be completed within one year typically must be written.

5. Can I convert an oral agreement into a written contract? Yes. It’s a good idea to memorialize any verbal agreement in writing to avoid misunderstandings and improve enforceability. A legal professional can assist with this.

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