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Is an oral contract a good idea?

In any business, a contract can help protect you or your business. Contracts set up terms and lay out expectations and provisions for everyone involved, holding each party responsible for their end. Depending on your business, you’ll need to assess what type of contract is best for you. And while there are a number of types to choose from, it’s important to know whether or not an oral contract will suffice.

 

What is an oral contract?

Simply put, an oral contract is a verbal agreement between you and your partner or employee. Despite the fact that oral contracts don’t exist in writing, they can still be legally enforceable. However, should a dispute arise, it can be difficult to prove the terms of an oral contract without enough evidence. That’s why an oral contract isn’t simply an informal or casual agreement over a cup of coffee, nor should it be.

Elements of an oral contract

While written contracts usually require a signature or two, a handshake usually seals the deal in an oral contract. But like any other contract, a verbal agreement must include certain elements in order for a court to consider it a legally enforceable contract.

The basic elements of a contract, oral included, involve:

  • An offer
  • A consideration
  • An acceptance
  • Mutuality

If you can prove to a court of law that these requirements took place, your oral contract is likely at the very least enforceable. However, an oral contract can only take you so far.

An oral contract may not be in your best interest

If something goes wrong, an oral contract may not be the best way to protect yourself or your business. As mentioned before, oral contracts are often easily disputable, especially if there was no one else to witness it.

Therefore, it’s better to stick to written contracts. An oral contract may be a red flag that a party might not honor the terms of the agreement. And although an oral contract may be an easier, less time-consuming option in some cases, it doesn’t guarantee your protection.

Written contracts, on the other hand, generally minimize the risk of contract breaches. And if that should happen, you can better protect your rights with a contract in writing.

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