Oral Contracts

What does Oral Contracts mean?

Although most contracts are written and signed by the consenting parties, a contract does not have to be written to be valid. In fact, an oral agreement, one which is spoken and not written, can be legally binding. 

For example, in the State of Texas a contract is valid if there is an: (1) an offer, (2) acceptance in strict compliance with the terms of the offer, (3) a meeting of the minds, (4) each party's consent to the terms, and (5) execution and delivery of the contract with the intent that it be mutual and binding.

Why is it good to have a written contract?

Although an oral contract may be legal and binding, it is much more difficult to enforce if there is a dispute. For example, if one or both parties decide to lie about the terms of the contract, the court may lack the evidence needed to make a decision. In fact, in some cases, they may only have the testimony of the contractual parties.

Does this mean you should never use an oral contract? No, it simply means that if you do, you must make sure to include all the requirements. For instance, if an oral contract is made it’s important to include the following elements:

  • Mutual consent
  • Offer and acceptance
  • Mutual Consideration
  • Performance
  • Good faith

When do I need a written contract?

If possible, it is generally a good idea to get things in writing. For example, if you have an agreement that a painter will paint a certain number of rooms for a certain price but the painter fails to perform the work, you will have evidence that they breached the contract.

There are, however, certain agreements which must be made in writing to be considered enforceable. For example, the following contracts must be in writing:

  • Contracts for a certain amount of money (varies by state)
  • Real estate sales
  • Agreements to pay someone else's debts
  • Contracts lasting more than one year
  • Real estate leases for longer than one year
  • Contracts lasting longer than the life of the party performing the contract

Breach of oral contract what are my rights?

Before deciding your course of action, if you believe a contract has been breached you will need to decide if you can establish that a contract existed, it was broken, the defendant is the one who caused your loss, and you did, in fact, suffer loss.

Many breaches of contract cases can be settled out of court. Others disputes, assuming they are for a small sum of money, can be settled in small claims courts. Still others may be resolved by filing a personal injury claim against the offending party and taking the case to court.

If you are the defendant in a breach of contract case you may also challenge breach of contract actions by proving the contract is not valid. For example, you could argue the other party committed fraud through intentional misrepresentation, negligence, concealment, or deception. Talk to a contract lawyer if you have questions about your contract case.

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