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What Are Oral Contracts?

A contract is a legal agreement that is binding onto the parties who have agreed to an exchange. Such a legal agreement may be formalized into various forms, written or spoken. When contracts are agreed to merely by spoken word, such contracts are referred to as oral contracts.

An oral contract works like any other contract. 2 persons or parties make an exchange of promises under certain terms and conditions that they have consented to. Failure to fulfill whatever terms, conditions, or promises made is referred to as a breach of contract. Once a breach of contract occurs, a party involved in the oral contract may file a lawsuit against the reneging party in order to gain damages or compensation for the losses suffered by the reneged party.

However, because of the nature of oral contracts as only spoken and not written, it is difficult to prove the existence of oral contracts in a court of law. It becomes difficult for a litigant to provide the terms and conditions of an oral contract, but if such proof exists, it is within the right of the court to legally enforce such terms and conditions.

It is possible for oral contracts to have a written component. For example, 2 parties that have entered into an oral contract may wish to write down the terms and conditions that they have agreed upon. However, the contract remains an oral contract since such terms and conditions were agreed upon only orally and not in writing. The writing component merely serves as a basis of reference in case of future disputes.

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