What is a Verbal Contract?

Mary McMahon
Mary McMahon

There are at least two different definitions of the term "verbal contract." In one sense, people use it to describe an oral contract, in which people make a spoken agreement, but that agreement is not formalized with a written contract. In another, more technical sense, a verbal contract is any contract which is expressed in words, whether they are written or oral. There are other types of contracts which people can agree to by action or inaction, with no verbal agreement of any kind.

Hair salons typically work on a verbal agreement basis.
Hair salons typically work on a verbal agreement basis.

The confusion with the sense of "oral contract" stems from the fact that many people use the word "verbal" to describe spoken words. In fact, any written contract is also a verbal contract, because it contains words. Hence, when people are talking about a spoken agreement, they should really use "oral contract" to make sure that people understand what they mean, as otherwise someone may believe that the contract was written.

When someone calls out an electrician, consent to perform service also implies intent to pay.
When someone calls out an electrician, consent to perform service also implies intent to pay.

In a verbal contract, the expectations of the contract are clearly spelled out, and all parties have agreed to the terms. Some written verbal contracts are made with basic forms which provide blanks for people to fill in specifics, while in other cases, they may be crafted by a lawyer to meet the needs of a particular situation. The enforceability of such a contract varies depending on whether it is oral or written, the terms of the contract, and other factors.

When a breach of verbal contract occurs, there are several potential methods of recourse. If the contract was oral, it can be hard to enforce without a reliable witness, and ideally there should be several. Written contracts are easier to enforce because a clear record of the agreement exists and it cannot be disputed. People who are not sure about whether an action will violate a contract should ask a professional. A lawyer can quickly review a contract to see if a particular action is permitted, or suggest a renegotiation of the contract to make an action permissible.

People actually agree to contracts all the time in their actions, without signing a single piece of paperwork or agreeing verbally to anything. For example, when someone visits a service provider like a doctor or hairdresser, accepting services implies that the customer intends to pay, and the service provider can bring suit if the customer fails to make good. Likewise, when someone calls out a plumber or an electrician, consent to perform service also implies intent to pay.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a wiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Discussion Comments


@Illych - Yes, technically an oral contract is legally binding, however if you really want a chance at making a legal case over an oral contract then you should only bother to pursue it if there were witnesses to the contract being made who will testify for you. Otherwise it'll be hard to prove the agreement ever took place.

It's for this reason that it's always best to have a written contract. Like they always say, get everything in writing. It's not worth taking the risk with any agreement over money, even if the person in question is your friend.


Are verbal contracts legally binding? Or should I say oral contracts?

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