It is a widespread belief that the oral contracts are as enforceable as the written ones. However, it is only partly true. Although there were many times when those actually worked, every good attorney would recommend their clients to have the most important contracts in a written form.
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What is an Oral Contract?
An oral contract can be defined as an arrangement that is partly or entirely based on the spoken communication but can be proved and does not violate the laws that prohibit verbal agreements, called the Statute of Frauds (Oral Contract, n.d., para. 1).
The Statute of Frauds
The Statute of Frauds establishes the rules for oral contracts, as well the cases in which they are unacceptable. The principal concepts to memorize are the following. If a contract involves the selling or buying of the land, the real estate or even just some goods but those that cost more than 500$, this contract is to be in a written form (Warner, 2003, para. 2).
The agreements that assume the responsibility for someone’s debt have to be written as well. This category also includes the arrangements that are made by different kinds of administrators. Finally, oral contracts are valid no more than a year (Warner, 2003, para. 2). These are only the primary rules of the Statute of Frauds, and different states usually add their own categories.
What to Take into Consideration?
Most commonly, a case refers to several of the categories the Statute of Frauds. Let us, for instance, examine the following. A person buys a laptop from a friend who has agreed to deliver this laptop in three days. This term is still within a year but a laptop can cost more than 500$, and in that case, a contract has to be in a written form.
Besides the fact that the categories of the Statute of Frauds usually overlap, there are also many other nuances. For instance, the contracts for life should not be verbal since all unwritten agreements are valid only for a year, and a person actually might die within this period of time.
Another important issue is what exactly counts as writing to meet the requirements of the Statute of Frauds. Not always the contract itself has to be in a written form – usually any writing that confirms the concepts of the agreement would be enough (Warner, 2003, para. 19).
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How to Make a Valid Oral Agreement?
The next obvious question is how to play it safe and make up a valid verbal contract. The principal problem with the oral arrangements is that people tend to interpret and remember the events and conversations in their own way, through the filter of their mood, emotions, etc. Two witnesses can describe the same situation in entirely different ways though both of them would be convinced that they are right.
For example, when a man hires a worker to complete the repairs in his house, both of them should come to an agreement on the number of rooms where the repair works are needed, the costs, the deadlines and so on. Otherwise, it can turn up later that each side has understood the agreement conditions in their own fashion, and misunderstandings can follow.
Even if the parties have decided to enter into an oral contract, and it does not violate the Statute of Frauds, it would not be superfluous for them to write emails to each other, in which the principal concepts of an agreement would be described. It is even better to send a letter with the contract conditions and ask the second party to sing it. The ideas of an arrangement should be explained concisely and precisely, so the third side can easily understand them.
The Risks to Consider
Precautionary measures concerning verbal agreements can seem to be unnecessary. However, if those are not taken, the second party can make use of such carelessness. In Hollywood, for instance, oral contracts for a very long time have been the backbone of numerous machinations, primarily concerning the copyrights, stolen ideas and so on. As an example, there is a dispute between a writer-director named Cohen and Effects Associates (Bogner, 2005, p. 372).
Cohen hired Effects Associates to produce special effects footage for his new movie, and the agreement was made orally. When the work was completed, Cohen paid only the half of an agreed amount of money, referring to the fact that he is dissatisfied with the result of work. There are numerous similar cases, and, certainly, they are not limited to Hollywood and the copyrights. What makes things even worse is that not all offended can easily restore the justice.
Expressed and Implied Contracts
An expressed contract can be defined as a binding arrangement (either verbal, written, or both verbal and written) between two parties, which mutually accept it and establish particular obligations to be performed. Besides this kind of agreements, there are also implied contracts, divided into implied in fact and implied in law.
A contract implied in fact “consists of obligations arising from a mutual agreement and intent to promise where the agreement and promise have not been expressed in words” (Contract Implied in Fact, n.d., para. 1).
As an example, there is a following situation. A customer asks a supplier to provide him or her with particular goods but do not ask about the current price of those. In this case, the customer and supplier do not make any expressed contract, although an agreement to pay the current price for the ordered goods, in fact, is implied. These arrangements are the true contracts.
Contracts implied in law differ from those implied in fact. They are also widely known as quasi-contracts since they can only be imposed if there is not any true contract, covering the same issue. Besides, only the law can impose those in order “to prevent unjust enrichment” (Quasi contract, n.d., para. 1).
The principal difference between the oral agreements and the contracts implied in fact
Although implied contracts do contain the points that are not expressed by the parties in words, those ideas are always implicated. So, these arrangements are valid. In the case of verbal contracts, the circumstances are just the opposite. While the parties agree on all of the contract concepts, those will not have much value until they are not written as well.
To conclude, there are a lot of different types and subtypes of arrangements, and to make a valid one, an individual should know all the circumstances and nuances in-and-out. Otherwise, there is also a heightened risk to reach an agreement with no value.
Bogner, M. S. (2005). The Problem with Handshakes: An Evaluation of Oral Agreements in the United States Film Industry. The Columbia Journal of Law & the Arts, 28, 359-451.
Contract Implied in Fact. (n.d.)
Oral Contract: Definition from Nolo’s Plain-English Law Dictionary. (n.d.). Retrieved from
Quasi contract. (n.d.)
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Warner, R. (2003). Statute of Frauds.