Q:

What makes a verbal agreement legally binding?

A:

There must be an offer and acceptance to create a legally binding contract, according to Nolo. In addition, because of the verbal nature of a contract, the agreement must fall outside of the statute of frauds, notes Professor Richard Warner for the Chicago-Kent College of Law.

The statute of frauds includes any agreement involving real estate, marriage, multi-year performance and the sale of goods over $500. Because these types of agreements are serious commitments of time and money, the statute of frauds requires such agreements to be in writing. If the oral agreement does not fall within one of these categories, there may be a legally binding contract, explains Warner.

While the statute of frauds covers the cost of goods over $500, services costing over $500 are not covered. A court determines the predominant purpose of a contract in deciding whether the contract falls under the statute of frauds, according to Jeremy Telman of Valparaiso University Law School. Many states have adopted the Uniform Commercial Codes that codifies the statute of frauds.

If there is no writing, then proving the terms of the contract can be challenging. The best evidence of the contract terms is how the parties to the agreement act, according to LegalZoom.


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