If two parties come to an agreement, but nothing is in writing, is that an enforceable contract in court? If the agreement meets the elements of a valid contract – offer, acceptance, consideration and a meeting of the minds – the answer is yes, the parties likely have a binding contract. Although the Statute of Frauds requires certain types of contracts to be in writing, in general, a contract does not need to be in writing to be enforceable. So, while an oral agreement that does not fall under the Statute of Frauds may be technically enforceable, if there is a breach of contract or a disagreement between the parties about the terms of the contract, it can be difficult to prove the elements of a verbal contract in court without additional supporting evidence.
Contracts That Must Be in Writing
Although, in general, there is no requirement that a contract be in writing to be valid, there are some exceptions. A law that requires certain contracts to be in writing is called the Statute of Frauds. The types of contracts that fall under the Statute of Frauds vary by state. Most states have adopted some version of the Uniform Commercial Code, which governs contracts involving the sale of goods. The UCC includes a requirement that contracts for the sale of goods over $500, lease contracts over $1,000 and agreements that create a security interest, such as a mortgage contract, must be in writing. Many states also require other categories of contracts to be in writing. For example, in Georgia, contracts for the sale of land and any agreement that cannot be performed within one year must be in writing to be enforceable.
Elements of a Valid Verbal Contract
Although contracts are governed both by state statutes and by common law, there are some general principles. To be considered enforceable, every contract, written or verbal, must contain four elements:
- Offer. The Restatement (Second) of Torts defines an offer as the manifestation of a willingness to enter into a bargain made to another person who understands that his assent to that bargain is invited and will conclude it. Example: “I offer to sell you my used bike for $10.”
- Acceptance. Acceptance is the unambiguous assent to the terms of the contract through words, deeds or performance. Historically, contract law requires that the acceptance must precisely mirror the terms of the offer. Example: “I accept your offer to sell me your used bike. I will pay you $10.” However, in modern contract law, there are exceptions to the mirror image rule. Under the UCC, if the acceptance is clearly expressed, there may still be a binding sales contract even if the acceptance has additional terms or terms that differ from the original offer.
- Consideration. Consideration is when something of value, like money or a specific action, is promised in exchange for the action or inaction of the offer. Without consideration, there is no contract. In the above example, the consideration is $10. However, if someone offers to give you their used bike for free, and you agree to take it without promising anything of value in return, there is no contract. If the seller failed to give you the bike as promised, you would have no legal recourse.
- Meeting of the minds. Both parties must have mutually understood and agreed to the substance and terms of the contract. In our example, if the seller offered to sell a used bike in exchange for $10, and the item the seller intended to sell was actually an adult 10-speed bicycle, but the buyer misunderstood and thought he was buying a child's bike, there would be no meeting of the minds and no enforceable contract.
Additionally, the subject matter of the contract must be legal, and all parties must have the legal capacity to enter into the contract. Legal capacity means the parties are not minors, are mentally capable of understanding the terms of the contract and are not under the influence of alcohol or drugs at the time they enter into the contract.
How to Prove a Verbal Contract in Court
When there is a dispute over terms or when one party fails to act according to the terms of a verbal contract, the issue becomes how to prove the existence of an oral contract in court. In civil cases, the burden is on the plaintiff, or the party initiating the case, to prove by a preponderance of the evidence that a contract exists. The plaintiff must show through facts, circumstances and the actions of the parties that each of the elements of a valid contract exists. To prove its existence, the plaintiff may need to provide evidence beyond oral testimonies of the parties to the contract, which are likely to be conflicting.
Evidence of a verbal contract might include proof that either party has already performed under the terms of the contract. For example, if the contract was for the sale of goods, a receipt showing the buyer paid the seller could be proof of the contract. Witnesses to the verbal agreement may also provide proof that a contract exists. Any written communications between the parties, including texts and emails, can further serve as evidence of an oral contract.
- HG.org: Are Verbal Agreements Binding?
- Nolo: Contracts 101: Make a Legally Valid Contract
- Nolo: Small Claims Statute of Limitations
- Legal Information Institute: Uniform Commercial Code
- The University of New Mexico: Elements of a Contract
- NY Litigation Firm: Restatement (Second) of Contracts
- Justia: 2017 Georgia Code
- Legal Information Institute: UCC Offer and Formation in Acceptance of Contract
- American Bar Association: Contract Formation