Oral contract

Contract between two parties that has been spoken, but not agreed to in writing or signed by both parties. Oral contracts are usually legally enforceable, though not in the case of real estate.

One that is not in writing or that is not signed by the parties. Oral contracts for most purposes are enforceable, but contracts for the sale of real estate must be in writing.

An unwritten agreement. With few exceptions, unwritten agreements for the sale or use of Real Estate are unenforceable. In most states, contracts for the sale or rental of real estate are, unless they are in writing, unenforceable under the Statute of Frauds. Verbal leases for up to a year are often acceptable.
Example: Abel agrees to sell property to Baker. Their contract is oral. Abel changes his mind. He faces no Penalty because oral contracts for the sale of real estate are unenforceable.

An agreement between parties that is either partly in writing and partly dependent on spoken words or that is entirely dependent on spoken words.

An oral contract is enforceable unless its subject matter comes within the statute of frauds, an English law adopted in the United States, that requires certain contracts to be in writing. For example, a contract to sell real property, to be enforceable, must be in writing to comply with the statute. An oral contract to sell personal property for an amount less than that set in the statute does not fall within its limits and, therefore, is enforceable without being reduced to a writing. The Uniform Commercial Code (UCC) governs the enforceability of oral contracts in sales transactions involving merchants.

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An oral contract is a contract that terms of which have been agreed by spoken communication, in contrast to a written contract, where the contract is a written document. There may be written, or other physical evidence, of an oral contract – for example where the parties write down what they have agreed – but the contract itself is not a written one.

In general, oral contracts are just as valid as written ones, but some jurisdictions either require a contract to be in writing in certain circumstances (for example where real property is being conveyed), or that a contract be evidenced in writing (though it may be oral). An example of the latter being the requirement that contract of guarantee be evidenced in writing that is found in the Statute of Frauds.

Similarly, the limitation period prescribed for an action may be shorter for an oral contract than it is for a written one.

The term verbal contract is sometimes incorrectly used as a synonym for oral contract. However, a verbal contract is one that is agreed to using words, either written or spoken, as opposed to an implied contract.

Texaco vs. Pennzoil case

Samuel Goldwyn said, "An oral contract is as good as the paper it's written on," but this is not always the case. For example, In 1984 after Getty Oil was sold to Pennzoil in a handshake deal, Texaco made a higher offer, and the company was sold to Texaco. Pennzoil filed a lawsuit alleging tortious interference with this oral contract, which the court upheld and awarded $11.1 billion in damages, later reduced to $9.1 billion, but increased again by interest and penalties.

External links

• Case study of Texaco vs. Pennzoil
• Book review regarding Texaco vs. Pennzoil.

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