Many people wonder about the validity of a verbal contract that is not documented on paper. Oral agreements are technically legally valid contracts. A contract is considered legally valid no matter what form it takes as long as it meets the following criteria:
A Contract Must Include Essential Terms
This means that the contract must clearly outline exactly what is being agreed to, who is involved, and any exchanges that are taking place. These terms must be legal in order for the contract to be legal.
A Contract Must Benefit the Parties Involved
All parties bound by a contract must gain some benefit from it. For example, a seller will receive money from a buyer, and a buyer will receive goods or services from the seller. This is referred to as ‘consideration.’
A Contract Must Clearly Show Agreement of Terms
Any legal contract must demonstrate that all parties bound by the contract have agreed to it in good faith. This is particularly difficult to prove in the circumstance of a verbal contract, since it is usually demonstrated through a signed statement.
Generally speaking, a contract that meets these requirements is legally valid. However, if a contract is disputed, it can only be enforced based on what can be proven through evidence, making oral contracts much more difficult to enforce than written agreements. Examples of evidence for proving a verbal contract include ongoing action of parties which suggest the existence of a contract as well as testimony from witnesses who observed the verbal agreement being made. If you are able to adequately prove your verbal contract it is enforceable by law, but we highly recommend drawing up any contract that you make on paper and having all parties sign it in order to ensure its enforceability.
Contracts that Cannot be Oral
There are certain circumstances in which a written contract is necessary in order for the contract to be legally binding. These circumstances include any contracts regarding the exchange of real estate, any agreement that includes a guarantee, distance sales contracts, and payday loan agreements. These types of contracts all require a written, signed document in order to be legally enforceable.
For assistance with enforcing, disputing, or creating a contract, get in touch with our experienced lawyers at Hoogbruin & Company. Book a free consultation today.