Oral contracts are contractual agreements made entirely on the basis of spoken communication (Stim, 2016). This is dissimilar to a written contract, where the existence of a contractual agreement is evidenced by a written document. Whereas written contracts are the norm, oral contracts are fairly commonplace. Indeed, many powerful individuals have participated in handshake deals. However, there is often controversy over whether oral contracts are legally enforceable. This paper discusses the concept of oral contracts in the U.S. and explains the extent to which they are legally binding. Attention is also paid to the notion of implied contracts.
Concept of Oral Contracts in the United States
In the U.S., contracts for the sale of goods or services and commercial transactions are governed by the Uniform Commercial Code (UCC) (Tepper, 2014). The UCC stipulates provisions for the enforceability of oral contracts. As there is no federal law governing contracts, the UCC provides guidelines for states to follow when dealing with contracts. All 50 states as well as the District of Columbia and U.S. territories have adopted the code, albeit with varying levels (Klass, 2010). For instance, some states like Louisiana have not adopted all the provisions of the code.
The UCC acknowledges oral contracts as legally binding agreements expressed in spoken communication as opposed to writing. The code provides that only certain types of contract need to be in writing (Tepper, 2014). Indeed, the UCC mandates written contracts in only a few circumstances. These circumstances are mainly stipulated under Article 2 of the code. Essentially, the UCC grants that contractual agreements are generally unwritten. Even so, written contracts remain far more popular than oral contracts.
Are Oral Contracts Enforceable?
Contrary to common belief, oral contracts could be legally binding agreements. The contracts are enforceable...
Evidence in this case mainly refers to witnesses (Klass, 2010). If the plaintiff produces witnesses present during the generation of the agreement, the court can enforce the agreement. Evidence may also include supporting materials such as mails, memos, letters, and faxes exchanged between the parties. In addition to evidence, the court must be satisfied that other elements of contract formation were fulfilled. These include expression of offer, acceptance and consideration of the offer, intention to enter into a contractual relationship, capacity to enter into a legally binding agreement (in terms of age and mental capacity), as well as the legality of the underlying good or service (Stim, 2016).
Nonetheless, there is one exception to the enforceability of oral contracts – the Statute of Frauds. Originating from English Law, the statute was designed to prevent deception, especially in agreements involving high stakes or long performance periods (Tepper, 2014). As per the law, certain contracts must be in writing. These mainly include agreements involving the sale of real estate property, leasing of real estate property, transfer of property, and debt payment (McKendrick, 2014). Contracts exceeding a certain sum of money (varies across states), lasting longer than the life of any of the parties, or requiring long periods of performance (mostly more than one year) are also required to be in writing (Klass, 201). Generally, an oral contract will not be enforced if it falls within any of these categories. In all states across the U.S., with the exception of South Carolina and New York, the Statute of Frauds is applicable.
Even so, similar to most laws, there are exemptions to the Statute of Frauds. An oral contract falling in any of the above categories may be enforced if one of the parties partially conforms to its terms or if the complainant incurred…
