I have seen situations where clients are concerned about the contracts that they have entered into because they are not in writing. The general rule, however, is that oral contracts are as enforceable as written contracts. Unfortunately, the terms of an oral contract are more easily disputed.
The situation also frequently exists where a written contract has oral terms that apply to it. When people negotiate a contract they often, at the last minute, discuss and agree upon additional provisions that they do not get around to putting into the written contract. These are oral provisions of a written contract.
If a lawsuit goes to trial in which there is an oral contract at issue, or oral provisions of a written contract, the decision of the trier of fact, whether it be a judge or a jury, will be based upon what is called the preponderance of the evidence. The proponent of an oral contract or the oral terms of a written contract does not have to convince the judge or the jury beyond a reasonable doubt about the terms or provisions of the contract. Rather, the proponent of the terms of the contract must only satisfy the trier of fact by what is called the preponderance of the evidence. An analogy that relates to this matter is that a person must only tip the scales of justice slightly in his or her favor at the time of trial to satisfy his or her burden of proof.
Our system of laws recognizes that the memories of individuals tend to fade over time. This is one reason why there is a shorter time limitation for bringing a lawsuit to enforce an oral contract versus a written contract. An oral contract can only be enforced when the lawsuit to enforce it is filed within a period of two years from the time of breach of the oral contract by the other party. On the other hand, when the contract is in writing, the law generally gives the aggrieved party a period of four years after the other party defaults to bring a lawsuit to enforce the terms of the contract.
Although the general rule of law is that oral contracts are as enforceable as written contracts, the law makes exceptions to this general rule of law. For example, a contract to sell real estate must be in writing and signed by the person against whom enforcement is sought. There are other exceptions to the general rule that oral contracts are enforceable. These other exceptions should be investigated prior to attempting to enforce an oral contract.
If you have questions regarding oral or written contracts or need assistance in drafting a contract, please contact our office for a personal consultation with an attorney.
About the Author: Richard H. Cochran has been a partner at Ruddell, Cochran, Stanton, Smith & Bixler since 1978. His areas of practice include business formation and representation, preparing and evaluating business related documents and contracts, and estate planning and estate administration.