What's a Verbal Contract, a Written Contract and a Oral Contract

There can be some confusion surrounding the differences between a verbal contract and a written contract, stemming from the fact that the term 'verbal contract' has come to be ambiguous. In everyday speech the term 'verbal contract' now usually means an oral contract, by which we understand that two parties have spoken and expressed terms in words, but not formalized a contract in writing. They have generally entered into an agreement that is only personally binding.

Oral Contract vs Verbal Contract

In reality, the term 'verbal contract' actually refers to any contract that is expressed in words, and that means all written contracts as well as those that have only been discussed. Though almost all contracts are expressed in words, there are major practical differences between oral contracts and written ones. To refer to a contract that's only spoken about, it's always best to use to the term oral contract.

If a contract has only been expressed orally, its terms can be extremely difficult to enforce. Both parties may have a hard time to successfully engage in legal action if something goes wrong unless there are witnesses to the spoken agreement. Ideally an oral contract would have several witnesses to it for any kind of legal enforcement to be practically enforceable.

While the terms ‘verbal contract’ and 'written contract' can both be used correctly to refer to the same things, a 'written contract' is much more specific. Using the term 'written contract' when referring to one that is expressed in words on paper and signed by both parties avoids any confusion caused by the ambiguity of the term 'verbal contract'.

Written Contract

A written contract always refers to a document that outlines an agreement entered into by two parties. These parties might be people, organizations or businesses, but their identities will be specified on the contract. For written contracts to be valid and binding they need to be signed by both parties. For some written contracts, counter-signatories might be required, or witnesses.

Written contracts can be simple or complicated, but their purpose remains to ensure that both parties understand the formal obligations involved in an agreement and are committed to complying with all the stipulations therein. Those signing a written contract have agreed to the terms set out and formally acknowledge their individual responsibilities. Written contracts are intended to stand up in a law court should either party renege on their side of an agreement and come to be subject to any legal action.