There is an old joke that “an oral contract isn’t worth the paper it’s written on”. That’s a reference to the fact that it can be very difficult to prove that an oral contract exists. Absent proof of the terms of the contract, a party may be unable to enforce the contract or may be forced to settle for less than the original bargain. Thus, even when there is not an opportunity to draft up a formal contract, it is good practice to always make some sort of writing, signed by both parties, to memorialize the key terms of an agreement.
At the same time, under most circumstances, if the terms of an oral contract can be proved or are admitted by the other party, an oral contract is every bit as enforceable as one that is in writing. There are, however, “statute of fraud” laws which hold that some contracts cannot be enforced unless reduced to writing and signed by both parties. Please note that, although sometimes an oral contract is referred to as a “verbal contract”, the term “oral” means “spoken” while the term “verbal” can also mean” in words”. Under that
definition, all contracts are technically “verbal“. If you mean to refer to a contract that is not written, although most people will recognize what you mean by “verbal contract”, for maximum clarity it is helpful to refer to it as an “oral contract”.
The Advantages of an Oral Contract
1. Oral can be easy to modify and easy to change on short notice. So, if the parties do agree to a month to month lease, the ‗offeror‘ can simply pick up the phone and inform the ‗offeree‘. Similarly, the landlord can evict the tenant in an oral month to month lease by
telling him that he has 30 days to vacate the property. It is easy to do and does not require cause or any other conditions that are common in a written lease.
2. Oral contracts to be simpler and easier to understand.
3. Oral contracts are easier to deal with than written ones, but the biggest problem is that there isn’t any proof of anything that was agreed to in the oral contract. If an issue should arise based on an oral contract, you will have a difficult time proving it.
4. So, while oral co are usually enforceable they may not be desirable. It is important to remember that written leases can be negotiated if there are terms in the original draft with which you are not comfortable and a written lease can give you a definite and permanent record of your agreement with your landlord should any issues later arise.
5. Oral contracts may also be advantageous to tenants for another reason. Many written contracts favor offerors.
Whether you decide to enter an oral or a written contract is a matter of personal preference for both you and your offeror. However, you should be aware that an oral lease can leave you vulnerable and is usually open to interpretation. Most landlords will prefer that a written lease be signed, especially if they are in the business of renting out more than one dwelling.
The Disadvantages of an Oral contract
1. Without a paper copy to look back on, it can be very difficult to determine what the terms of the lease are at a later date if the landlord and the tenant have a misunderstanding about the lease terms. For example, if an appliance breaks in the dwelling both parties may, in good faith, believe the other party to be responsible for its repair. However, without a written contract to look back on it is hard to tell which party had a correct recollection of their oral agreement.
2. Written contracts tend to contain more provisions, qualifications and responsibilities.
3. Other situations may arise when one party does not act in good faith and tries to manipulate or change the contract to their advantage because there is no written record of it. For example, a tenant who entered a 12 month lease with the landlord and in month 5 has decided to relocate to another city may try and claim that the lease was a month to month agreement and not for a full year. Without a written lease as confirmation, it could be difficult for the landlord to prove that the lease was in fact for a one year period.