Oral Contract: Everything You Need to Know
An oral contract is the kind of spoken agreement for giving and receiving goods and services or for personal relationships. But, a written contract has a greater use. 3 min read
An oral contract is the kind of spoken agreement for giving and receiving goods and services or for personal relationships. But, a written contract has a greater use.
Oral and Written Contracts: Differences and Conditions
An oral contract or an oral agreement finds use in an informal agreement when there is mutual consent to an arrangement of providing and receiving of services or goods. One finds oral contracts in use among longtime traders and business partners.
The oral contract is one type of contract; the others are written and implied contracts.
- You can bring the party named in the written contract to a law court and enforce the written agreement.
- If you want to enforce an oral contract, you must give documented proof that an oral contract exists if the other party does not acknowledge the terms of the agreement.
- The involved parties must state clearly the key terms, time, and amount for the delivery and receipt of the goods and services, and all related issues arising from the same.
Background for Enforcing Contracts
You may use an oral contract in a contractual relationship like you do with a written agreement. Though this is not common, if it is provable and does not violate the Statute of Frauds, you may use it as a working contract. If it does violate the Statute, then you must get yourself a written contract. For instance, if you deal with goods worth over $500, you must use a written contract.
What Conditions Make It Necessary to Use the Written Contract?
The Statute of Frauds helps prevent any deceitful behavior. When the business dealing or personal relationship is of a long duration, usually over a year, or the amount of money or property involved is huge, one must use a written contract. This Statute needs a written contract in almost all the states when the following situations occur:
- An agreement involving the payment of the debt of another person.
- When contracts have a longer life than that of the person named in the contract.
- Leases of property lasting over one year.
- Contracts having a work period longer than a year.
- A contract having a value over a specific amount – the amount varies according to the state.
- Sale of real estate.
- Property transfer when the owner dies.
If you have an oral contract for any of these issues, the court will not enforce them. And, if an oral contract falls within these provisions, the court will still enforce it:
- If the provider of the services or goods only fulfilled the terms partially.
- The receiver of the services or goods depended on the supplier but as a result, suffered some damage or loss.
Basic Essentials of a Contract
The contract results from the acceptance of an offer. The provider of the services or goods makes the offer, and when the other party accepts all the conditions of the offer, it becomes a contract. Thus, the feeling of mutual accord conveyed by the acceptor of the goods and services to the offeror is acceptance. The contract becomes binding when this acceptance is absolute and without any kind of restraints.
Make a Counteroffer in an Oral Contract
If there is any kind of variation in the conditions of acceptance, it becomes a counteroffer. The acceptance is not a valid acceptance and so it cannot lead to a contractual relationship. Once there is a counteroffer, the other party has the obligation to accept it or to make a second counteroffer. This will occur until there is valid acceptance. Once the two sides agree to the deal, the contract becomes binding.
The simple type of acceptance is a handshake and is the basic form of an oral contract. But, oral contracts are not favored under the contract law. You cannot prove oral contracts so easily and the tendency of the parties involved is to cheat.
Prevent Breach Using a Written Contract
After you have a binding contract, if one of the sides does not fulfill their side of the deal, there is a breach of contract. To find the solution of the breach of an oral contract, have both the parties not decide on the key terms or the time period of payment until they have negotiated a written contract. If you have the written contract, then you have legal recourse in case of a breach of contract.
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