In the modern world, oral contracts, except for very small transactions, have mostly fallen out of favor due to a principle in contract law known as the “Statute of Frauds.” This principle has its origins in seventeenth century England. In 1677, The Parliament of England passed an Act titled “An Act for Prevention of Frauds and Perjuries”, which required certain types of contracts to be in writing in order to be enforceable. After the passage of this Act, English law required contracts for certain large financial transactions to be in writing, and would not enforce purely oral contracts for large transactions.
The intent behind this law was to prevent people from deceitful practices in which a plaintiff would claim that a contract existed, or that terms in a contract existed, despite the other party never agreeing to the terms that are alleged by the plaintiff. However, this law also made another form of deceit easier, a defendant claiming that no contract exists, or that certain terms to a contract don’t exist, because they were never written down.
In the United States, the principle of requiring certain contracts to be memorialized in writing is called the statute of frauds, in reference to the law passed by the English Parliament in 1677. Many U.S. states will not enforce a purely oral contract for some large transactions and therefore in many states it is required to memorialize such contracts in writing.
As a contracts lawyer from Mughal Law Firm PLLC explains, not all states have a statute of frauds. However, some common types of contracts for which a statute of frauds would apply are contracts that cannot be performed within one year, contracts involving the sale of goods over $500 dollars, or contracts that involve the sale of land.
There are many benefits to having a written contract over a purely oral contract, or in having an oral contract memorialized in writing. Taking the time to read over terms on paper can give a party breathing room to back out of a bad offer, and having terms preserved on paper can be very useful in case of a future dispute. If you have agreed to an oral contract with someone, it is important that you consult with a contract attorney to see if the contract you agreed to needs to be memorialized in writing. You may need to contact an experienced contract attorney in your area to determine whether your oral contract needs to be memorialized in writing.