Oral contract: Overview, definition and example
What is an oral contract?
An oral contract is an agreement made through spoken words, rather than written documentation. While not written down, oral contracts are still legally binding, as long as they meet the basic requirements of a contract, like mutual consent and a clear offer and acceptance.
For example, if one business agrees to provide services for another in exchange for payment, and both parties discuss the terms verbally, this would be an oral contract.
Why is an oral contract important?
An oral contract is important because it shows that agreements can be made without formal written documents. However, it can be harder to prove the terms of an oral contract in case of a dispute, since there's no physical record of the agreement.
Even though oral contracts are enforceable, they can lead to confusion or disagreements, especially if the terms are unclear or if one party denies the agreement.
Understanding oral contracts through an example
Imagine a company hires a consultant to help with a project. They verbally agree that the consultant will be paid a certain fee upon completion of the work. However, there's no written contract. If the consultant finishes the project but the company refuses to pay, the consultant could still take legal action based on the oral agreement.
However, without written proof, it could be difficult for the consultant to prove the terms, making it harder to enforce the agreement.
An example of an oral contract
Here’s how an oral contract might look:
"I will provide consulting services for your company in exchange for a payment of $5,000 upon completion of the project."
Conclusion
Oral contracts are agreements made through spoken words and are just as legally valid as written contracts, though they can be harder to enforce. It’s important to clearly communicate terms when entering into an oral agreement and, when possible, follow up with written documentation to avoid potential disputes.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.