An oral contract is a

contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...

, the terms of which have been agreed by spoken communication. This is in contrast to a written contract, where the contract is a written document. There may be written, or other physical evidence, of an oral contract – for example where the parties write down what they have agreed – but the contract itself is not a written one. In general, oral contracts are just as valid as written ones, but some jurisdictions either require a contract to be in writing in certain circumstances (for example where

real property In English common law, real property, real estate, immovable property or, solely in the US and Canada, realty, is land which is the property of some person and all structures (also called improvements or fixtures) integrated with or affixe ...

is being conveyed), or that a contract be evidenced in writing (although the contract itself may be oral). An example of the latter is the requirement that a contract of guarantee be evidenced in writing, which is found in the

Statute of Frauds The Statute of Frauds (29 Car 2 c 3) (1677) was an Act of the Parliament of England. It required that certain types of contracts, wills, and grants, and assignment or surrender of leases or interest in real property must be in writing and sign ...

. Similarly, the limitation period prescribed for an action may be shorter for an oral contract than it is for a written one. The term ''verbal contract'' is sometimes used as a synonym for oral contract. However, since the term ''verbal'' could also mean just ''using words'', not only ''spoken words'', the term ''oral contract'' is recommended when maximum clarity is desired.

Enforcement

Provided that an oral contract satisfies any requirements imposed by law, such a requirement that contracts for a specific type of transaction be in writing, it is legally enforceable. For example, in 1984,

Getty Oil Getty Oil was an American oil marketing company with its origins as part of the large integrated oil company founded by J. Paul Getty. History J. Paul Getty incorporated Getty Oil in 1942. He had previously worked in the oil fields of Oklaho ...

was sold to

Pennzoil Pennzoil is an American motor oil brand currently owned by Shell plc. The former Pennzoil Company had been established in 1913 in Pennsylvania, being active in business as an independent firm until it was acquired by Shell in 2002, becoming a bra ...

in a handshake deal, a lay term for an oral contract, which was binding under New York law.

Texaco Texaco, Inc. ("The Texas Company") is an American Petroleum, oil brand owned and operated by Chevron Corporation. Its flagship product is its Gasoline, fuel "Texaco with Techron". It also owned the Havoline motor oil brand. Texaco was an Indepe ...

later made a higher offer, and the company was sold to Texaco. Pennzoil filed a lawsuit alleging

tortious interference Tortious interference, also known as intentional interference with contractual relations, in the common law of torts, occurs when one person intentionally damages someone else's contractual or business relationships with a third party, causing e ...

with the oral contract and, after prevailing in court, was awarded $11.1 billion in damages, later reduced to $9.1 billion plus interest and penalties. In a United Kingdom case, ''RCS Contractors Ltd v. Conway'', the parties to an otherwise valid oral contract for construction services disagreed as to whether they had entered a single oral contract for work at three sites, or three separate contracts, one for each work site. Without a written agreement, the court had to examine other evidence to attempt to discern the intent of the parties, ultimately concluding that the parties were operating under a single contract.

References

{{reflist Contract law

Enforcement

See also

References