Through spoken communication, sometimes including a handshake, two or more parties (or individuals) may enter into an agreeable oral contract or referred to as “meeting of the Minds ” (mutual consent). It is understandable that a discussion of an offer does not constitute an acceptance. An oral contract may include aspects of information, from previous letters or memos exchanged between the parties. The agreement does not have to be in writing in order to binding and enforceable. The basis of an oral contract may exist for selling something, buying something or taking action upon a statement. The terms of an oral contract are harder to prove in court, or either party will likely, have to accept a settlement for less than the original agreement. Frequently, oral agreements fail because of misunderstanding or failure to disclose details. Certainly it would be advantageous to legally tape record or videotape oral agreement with the consent of all parties, thus confirming the terms of the agreement. A breach of oral agreement can be pursued in small claims court, provided the amount is less than $5,000. Any amount above $5,000, damages must be brought to the attention of a District Court. Each state has a statue of limitation, regarding the maximum length of time available to pursue any legal lawsuit for a breach of an oral (or written) contract. In the state of Arizona, that is a period of three years after a breach.
Legally, an oral contract could become invalid or voided, upon certain conditions or known as “statue of fraud” laws, requiring certain contracts be written and signed, in order to secure enforcement. The following outlines oral contracts, which are considered invalid:
- When a contract is based upon something illegal or doing something that violates local, state or federal law.
- When an agreement has no specified terms.
- When a fundamental part of the agreement is misunderstood or mistaken by one or both parties.
- When the subject or terms of the agreement are prohibited under the law.
In a court of law, a party must prove their case by “a preponderance of the evidence,” or provide a majority of evidence, proving an oral contract should be revoked. Certainly, a witness testimony is very helpful. However, when a witness offers testimony and gains something in return (such a monetary gain), a judge will probably require evidence to support the corroboration (reinforce) testimony of the witness.
The actions of either party could be sufficient or disprove the validity of an oral contract. For example:
Writing a check or depositing a check, in regards to an oral contract, provides sufficient corroborating evidence. When a plaintiff or defendant is caught lying, when providing testimony or committing perjury, their credibility becomes almost worthless, and the same applies to any witness. (When found guilty of perjury under Federal law, this entails a prison sentence for up to five years.) Providing documentation regarding the factors of an existing oral contract could win the dispute. Presentation of facts regarding the case is important. Certainly having legal representation in court from an experienced attorney is recommended, against the potential loss.
Certain oral contracts are not legally enforceable, if they pertain to any of the following and thus must be in writing:
- Contracts for sale or regarding purchase of land.
- Contracts related to the sale or purchase of goods priced above $500.
- Oral contracts regarding: Marital settlements or prenuptial contracts.
- Contracts that cannot be performed, within one year of the time the contract is stipulated becomes invalid.
Frequently, un-rationalized decisions forgoing a written contract for an oral contract. These include not having sufficient time to write down a written contract. Recognizing the fact, legal problems derived from an oral contract will take longer time to dispute. The other party won’t agree to a written contract. This should reflect an ominous warning, regarding the integrity and trust, which may not be forthcoming. The agreement is too complicated to be written down. If the agreement can’t be written, then trying to explain the terms of the agreement to a judge or jury will be more difficult, when seeking enforcement. When one party desires an oral contract, which may exclude some fine details (which could have been outlined in written contract), this maybe an attempt to hide information from the other party, and thus serve as scrupulous advantage. Certainly, in this situation, detailed information should be provided in a written contract, and thus become knowledgeable to each side and be enforceable.