Are Oral Contracts Legally Binding Under California Business Law?

What To Know About Agreements Explained By Los Angeles Contract Attorneys

Are All Oral Contracts Legally Binding?

Generally speaking, an oral contract is indeed legally enforceable. Although for more complicated contracts, such as those in complex commercial transactions, the contractual parties usually create agreements in writing to avoid any dispute regarding the terms.

However, certain types of contracts must, as a matter of law, be in writing to be legally enforceable. For example, those creating rights and obligations in and over real property must put the contract in writing for it to hold weight.

Express and Implied Terms Definitions in Contracts

“Express terms” are terms that have been unambiguously expressed by the two parties in writing (or orally) in the contract.

“Implied terms” are terms that have never been expressly mentioned by the parties. Terms may be implied by the parties themselves, by law, or by customs.

Do I Need a Written Contract?

Contrary to what most believe, an informal exchange of promises can still be binding and legally as valid as a written contract. A spoken contract is often called an “oral contract,” not a “verbal contract.” A verbal contract is simply a contract that uses words. All oral contracts and written contracts are verbal contracts. Contracts that are created without the use of words are called “non-verbal, non-oral contracts” or “a contract implied by the acts of the parties.”

Courts in the United States have generally ruled that if the parties have a meeting of the minds, and act as though there was a formal, written and signed contract, then a contract exists. However, most jurisdictions require a signed writing for certain kinds of contracts (like real estate transactions). A law setting out such requirements is typically called the Statute of Frauds. The point of the Statute of Frauds is to prevent false allegations of the existence of contracts that were never made, by requiring formal (i.e. written) evidence of the contract.

When is a Written Contract Void?

The existence of a written contract does not necessarily ensure its enforceability or validity. A contract can be deemed unenforceable if it requires a party to undertake an illegal act, if it was signed under duress or while intoxicated, if the disparity in knowledge between the parties is extreme and the weaker party was given onerous terms, etc.