Legal Advice: Understanding Oral Contracts

Quick tips on understanding and defending an oral contract.

Understanding Oral Contracts

An oral contract is a verbal agreement made between two or more people about an exchange of goods or services, or a guarantee on the quality of a product. The concept of the oral contract may seem straightforward at first, but there are issues that need to be considered before entering into one.


There are instances when an oral contract is not legally binding:

1. If the agreement made regards something that is illegal in nature and that violates a local, state, or federal law, then the contract is considered void. For example you can not enforce a verbal contract that was for an exchange of stolen goods.

2. If the verbal contract is vague and does not tie down specifics, then the contract doesn't exist. For example if you were talking with a friend and said you would like to buy a part of their record collection sometime, then there was no oral contract made. This is due to the fact that your statement of interest did not include a purchase price, exactly which records you intended to buy, or an intended date of purchase. Therefore your friend could not sue you to buy the records because no contract was made.

3. If both parties involved in the oral contract transition had a misunderstanding about the main context of the contract, then the oral contract does not exist. For example, if the oral agreement was to buy a doghouse and a purchase price was agreed on, but the exact model of the doghouse was not clarified and each party thought the contract was for a different model, then the agreement is void. Because the exact item in question was not specified and both of the contracting parties had a different product in mind, no oral contract was formed. Both parties need to be on the same page in order for the contract to be formed. Again specifics need to be detailed to make sure both parties understand exactly what is being sold for exactly how much.

4. There are transactions that require a written contract. In these cases oral contracts are not sufficient enough to be legally binding. Examples of these types of transactions are real estate transactions, credit agreements, and employment contracts that last longer than one year.


Because oral contracts are oral and not written it is very difficult to defend them in a courtroom situation. These types of cases often boil down to my word against your word. If the oral contract is in breach and you sue for damages, the offending party more than likely will contest that a contract even existed. In this case you will need to prove that the oral contract does exist. Unless you can produce "a preponderance of the evidence," or enough evidence to prove your claim, it may be next to impossible to prove.

What will help you is a witness to the agreement. Another employee or a friend that attests that they were with you at the time the agreement was made and can confirm the details of the agreement would be a key piece of evidence for your case. Unfortunately, if the witness is a colleague of yours, then this statement may not be enough to sway the judge to enforce the contract. However if you can find a witness that you do not know personally that understands the nature of the agreement and is willing to confirm your position, then this could be a very valuable witness and help you win your case. Other pieces of evidence that can help prove your case are actions you took to fulfill your side of the agreement. An example of this type of evidence is a check that you wrote to the other party as payment for services, supplies, or as a down payment for services.

When presenting your case in the courtroom it is important to make a good presentation. Don't tell a lie about your actions, even if it seems minor. These types of inconsistencies will more than likely be found out later and will hurt your case. Be organized and prepared for your testimony. Have your evidence and statements prepared and ready for retrieval. This will help portray you as honest and trustworthy, and your testimony will be seen as more truthful and reliable than if you appeared unorganized and grasping for straws.


If your oral contract is in breach and you decided to sue the following tips will help you prepare a good case and presentation. It is important to remember going in to this that the other party is innocent until you prove they are in breach. You have to provide the hard evidence that proves that the contract existed and that it is in breach.

TIP 1: Organization of your presentation is key. Be familiar with every piece of evidence you have and prepare testimony on questions that you suspect that the judge will ask. For example know the date, time, and location the oral contract was made, who was present, and the terms that were discussed. Know what evidence you intend to present. To keep track make a list on a note card or on a legal pad that details the numbered pieces of evidence, their significance to the case, and any other supporting information. Also you will want to anticipate what the other party will say in their defense, so be ready to counter their claims with evidence.

TIP 2: Organize your evidence. The judge will request to examine it so have it prepared ahead of time so you can hand it off quickly without searching. You will want to present originals whenever possible. Copies are all right, but there is always a chance that a copy has been altered. Certified copies of documents are better than a regular photocopy and will bear almost as much weight as an original. Other pieces of evidence like photos, canceled checks, receipts, work orders, letters, etc., all should be clean and easy to read.

TIP 3: In disputes over oral contracts, witnesses are often the only evidence that can be produced. Find as many reliable witnesses as you can. People who don't stand to gain anything from their testimony are the most valuable.

TIP 4: Be in control of your emotions and don't yell or whine.

TIP 5: Don't lie about the events or make false statements. Even small lies have a tendency to be found out later in the testimony and will hurt your chances of winning.

TIP 6: Stay focused on the facts of your case. Don't stray to references of past violations made by the other party unless it directly affects the case being presented.

TIP 7: Practice your testimony. Be prepared to support every statement you intend to make with evidence.

TIP 8: It is always best to have a lawyer represent you in a legal dispute, however in small claims court you have to weigh the benefit of legal representation against the cost of the lawyer and the potential gain from the suit. For example if the case was for a contract worth only $400 and the attorney fee would be over $1000, then it is not financially viable to hire an attorney. However a quick consultation for $100 may be worth the investment to help you prepare the case yourself.

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