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The enforceability of oral contracts

On Behalf of | Jun 23, 2021 | Business Law And Litigation |

While most people in Texas think that all contracts are in written form, they fail to realize that there are verbal contracts (sometimes also referred to as oral contracts). Under certain circumstances, a verbal contract can also be binding on the parties. A verbal contract is a legal agreement with all the necessary elements of a contract. However, the contract is not written. The lack of a written document makes it much more difficult to resolve a dispute over the agreement. Thus, testimony from the parties as well as from any other witnesses with first-hand knowledge of the agreement is essential.

Are verbal contracts enforceable?

Just like written agreements in business law, many verbal contracts are enforceable. However, these contracts need to have certain attributes that are required to enforce them. Enforcing a verbal contract is different from enforcing a written contract. The lack of documents that set out the terms of the contract and the duties of both parties makes the process more complex.

How to enforce a verbal contract

For a court to enforce a contract, the judge must understand the verbal contract terms. Unfortunately, in most verbal contract situations, the parties often disagree on the terms of the verbal contract (and sometimes, on whether there ever was a verbal contract). Thus, the first issue is to present credible testimony of the terms of the verbal contract. The second issue is to demonstrate that the other party failed to abide by the terms of (or breached) the verbal contract. The final issue is to show the amount of damages caused by the other party’s breach of the verbal contract.

Proving the terms, breach, and damages

To prove the terms, breach and damages with respect to a verbal contract, the evidence will be the testimony of of each party – their view of how the verbal contract was agreed to, the terms of the verbal contract, and how the parties dealt with each other after the verbal contract was formed (i.e. performance, breach, etc.). Consistency is a key. A party whose actions and testimony are inconsistent with his/her her version of the verbal contract will often be seen as less credible. Related documents such as invoices, payments, emails, and texts that are consistent with a party’s version of the contract may strengthen his/her position.