The Validity of Oral Contracts

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You have always been told to get things in writing if possible, as this will make prosecution and defense much easier.  Nevertheless, is it reasonable to assume that no oral contracts would ever be binding from a legal perspective?  No, it wouldn’t—in fact, all oral contracts are legally binding.  The only legal obstacle would be in proving that an oral contract was in fact made.  Therefore, the attorney must prove that his or her client did make an oral contract with the other party. 

Factors that can Determine the Validity of Oral Contracts

Witness Testimony

If other parties were present during the time the two primary parties made an oral agreement, and are willing to testify, then this can be one way to prove the existence of this verbal contract.  These other parties must be able to prove in their testimony that they heard the terms of the agreement. 

Course of Conduct

The course of conduct refers to the proven and accepted history that has transpired between two parties, which allegedly made a verbal contract.  For example, if Person #1 offered to buy a house from Person #2, and Person #2 accepted the deal and signed over the deed, then this is definite course of conduct evidence.  Now if Person #2 decides he doesn’t want the house because it’s haunted, then nothing has changed regarding the existence of the verbal contract.  It has already been established.  Also, taking action that would suggest the existence of an oral contract could be considered course of conduct evidence.  For instance, if you pay a paperboy to deliver a newspaper for a week, but later change your mind and refuse to pay, you would be unable to claim that a verbal agreement for newspaper delivery never existed.

Credibility of the Parties

The credibility of the party can also be established or questioned in court.  This isn’t the same thing as witness credibility or character credibility.  It’s more a matter of proving that an individual action or statement was credible or incredible.  If a person walks inside a restaurant and orders food then it’s understood that a binding oral contract is made.  Claiming that one thought the food was free (if not explicitly stated) and refusing to pay for the service would be an incredible incident, and unlikely to hold up in court.  

Without these three major factors, proving that an oral contract was agreed upon can be difficult.  If you make an oral contract with a stranger in business dealings then one of the two parties could easily deny ever agreeing to an oral contract or claim that such an agreement was not made in good faith.  (Such as a “Yeah, sure” kind of brush off, not meant to be taken seriously)  This is why credibility, course of conduct or witness testimony must be considered in most court cases involving contract disputes. 

For more information on the validity of oral contracts as well as enforcement from state to state, consult with a business lawyer in your area to discuss your case.

 

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