What is an oral contract?

An oral contract is an agreement between two or more parties that is made without the exchange of written documents. In Tennessee, oral contracts are considered to be legally binding contracts. The statute of frauds in Tennessee states that any contract for the sale of goods exceeding $500, any contract involving real estate, or any contract that is not to be completed within a year must be in writing, signed by the parties, and witnessed. If the contract is something that does not need to be in writing, such as setting up a loan between a creditor and a debtor, then the terms of the loan agreement can be conveyed orally. The creditor and debtor can discuss a loan interest rate, repayment schedule, and any other details of the loan. Once these terms are agreed upon, an oral contract has been made and both parties must adhere to it. However, an oral contract will be more difficult to enforce because there is no written document to prove the agreement. The laws in Tennessee and other states provide that an oral contract is only enforceable if there is evidence that the contract was made. This evidence could include testimony from both parties, or other forms of proof that the contract was agreed upon. In summary, an oral contract is an agreement between two or more parties that is made without a written document. For oral contracts to be legally binding, they must comply with the statute of frauds in Tennessee. However, because there is no written document for such a contract, it may be more difficult to enforce.

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