Is an Oral Business Contract Enforceable?

When Must a Business Contract Be in Writing to Be Valid?

In business, it’s common for most communications to be verbal—on the phone or even in person. Suppose you have a conversation with a customer, supplier or potential partner and you come to a basic agreement about the purchase of goods or services. Do you need to put the terms of the agreement in writing for it to be enforceable? Are there specific situations where a contract will only be enforceable if it is in writing?

Are Oral Contracts Enforceable?

As a general rule, oral contracts are enforceable, provided:

• All the elements of a valid and enforceable contract are present
• The contract is not required to be in writing by a relevant “Statute of Frauds”

What Are the Required Elements of a Valid and Enforceable Contract?

Under long-established contract law, there are five requirements for an agreement to be enforceable in court:

• There must be an agreement—In classic contract law, this requires an “offer” and an “acceptance” of that offer. Any acceptance that changes the terms of the offer is not considered an acceptance, but a counteroffer that the other party may now accept or reject.
• There must be consideration given by all parties to the agreement—This means that each party must either promise to give something of legal value or refrain from doing something he or she has a right to do.
• The parties must knowingly enter into the contract—A contract will not be valid if there was misrepresentation, duress or undue influence by one of the parties
• The parties must have contractual capacity—They must know that they are entering into a contract and understand the terms. If a party is a minor, is mentally ill, or is intoxicated or impaired at the time of the contract, it may not be valid.
• The contract must not be for any illegal purpose

When Must a Contract Be in Writing?

Every state has its own “Statute of Frauds,” a law that identifies what types of contracts must be in writing to be enforceable. In Texas, the Statute of Frauds requires that the following agreements be in writing:

• Marriage contracts
• Contracts involving an interest in land or real property
• Contracts of suretyship, where one party promises to pay the debts of another party
• Contracts that, by their terms, may not be fully performed within one year of the date of the contract
• Contracts for the sale of goods priced at $500 or more

Contact MCIS Law

At MCIS Law, PLLC, in Stafford, we provide comprehensive counsel to businesses in southeast Texas. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.