Legally Binding Contract – Written Contract Vs. Oral Contract


What Makes A Contract Valid?

First off there must be a meeting of the minds. There will have been both an offer and an acceptance – resulting in agreement. Then there must be consideration – meaning that both parties exchange something of value. If value only comes from one direction, the value that is exchanged is a gift – not subject to enforceability like a contract.

Does A Contract Need To Be Written?

There are special types of contracts that must be written – such as contracts for the sale or long term lease of real estate. Most contracts are valid, however, even if there is no written document. Of course, any important agreement should be documented in writing to reduce the likelihood of dispute or misunderstanding.

Contracts That Must Be In Writing

Generally, an oral contract (although difficult to prove) is a valid contract. In most states, the only contracts that must be in writing are: contracts involving the sale of real estate, contracts for the sale of tangible personal property worth $500 or more, contract that cannot be completed within a one year period and a promise to pay the debt of another party. That said, the issue of proof makes it advisable to memorialize any significant agreement in a signed, written contract.

Form Of A Written Contract

In most cases, both parties to a contract are best served by a document the clearly sets forth the rights and responsibilities of each party and is signed by both parties. However, a written contract will generally be valid even in the form of a letter or memo, so long as the letter or memo is signed by the party against which it is being enforced. It is helpful, of course, to have an agreement that is clearly labeled as such, so that intent is not called into question.

Unfair Contracts

In most cases, if you agree to a contract that leaves you holding the bag, you have little recourse because “a bargain is a bargain.” There are exceptions, most notably in situations that involve fraud or misrepresentation. There may also be grounds to overturn a contract with terms that are considered by a court to be unconscionable, especially when the terms take hurt a person who is disadvantaged. A contract that requires an illegal action is also invalid.

Keep Your Contracts Simple

There is no reason to fill your contracts with legalese. The best contracts are the ones that are easily understood – written in plain English. That doesn’t mean that it’s unimportant to cover key provisions, such as the term, the jurisdiction, etc. It does mean that long, Latin sounding words can do more harm than good. The most important points to cover in plain English are the two elements that make the document a valid contract: 1) the specific provisions of the agreement between the parties and 2) the items of value that are to be exchanged between the parties.

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