Is an Oral Contract a Valid Agreement?

Is an oral contract a valid agreement? A contract is normally thought of as a document. It includes features like the parties involved, each party’s obligations and penalties for failure to abide by the terms of the agreement.  There must be a written agreement to have a binding arrangement between two parties, right? While this is a common belief, it is not necessarily accurate.

Written contracts are better, but unwritten or verbal contracts are just as enforceable (unless the law otherwise requires that the contract be in writing). What is a contract, and what makes it enforceable? There are three elements to a contract:

• An offer
• An acceptance of the offer
• Consideration, otherwise known as conferral of a benefit or imposition of a burden

Let’s say you are a contractor offering a building owner $5,000 for a service. That is the offer. The building owner agrees to pay $5,000 for you to perform the service. This is the acceptance. A contract has been made…or has it?

The service has been completed. Your end of the deal has been met and now it is time to collect your $5,000. Suddenly, the owner does not recall making a deal with anyone, much less with you. The owner can see the job you did, but was not present when you did it. He does not remember the agreement. He does not know if you were the individual who performed the service. Now what?

The oral contract depends on things like good memories, moral character, etc. There is no proof. Therein lays the peril of oral contracts. What about instances when an oral agreement does not work?

Promising to pay another person’s debt, pre-nuptial agreements, agreements transferring an interest in real estate and agreements lasting for more than a year are all circumstances that require a written contract.

A written document is not necessarily required to formulate an agreement. However, written agreements provide more assurances for the parties involved. Have all pertinent questions regarding performance of the contract been addressed? All have been addressed but one. Who writes the agreement? Written agreements should be drafted by a person with experience in this area, such as an attorney.  This way, many pitfalls can be avoided.