Oral contract - is this type of contract valid?

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An oral agreement is nothing more than establishing provisions in an interview and a commitment to fulfill them. A unanimous declaration of will by two or more parties results in the conclusion of an agreement the purpose of which is the creation, change or termination of a legal relationship. Contract matters are regulated in the Civil Code. The most trivial example of an oral contract is shopping at a market. The agreement of the price and the payment indicate that the contract was concluded and no written content was needed for this. Such simple contracts of everyday life can be concluded even by persons without legal capacity, e.g. partially incapacitated persons or children.

The method of concluding contracts is also specified in the code. These include the offer and its acceptance, auction and tender, and negotiations. Is an oral contract acceptable in matters related to commercial law? Check when a verbal agreement is valid.

Freedom to choose the form of concluding the contract

The parties' declaration of will to conclude the contract may be submitted in any way. However, it is important that the content of this declaration is understandable, does not raise any doubts and that there are no obstacles to legal action in the chosen form. The Civil Code lists legal actions that must be performed in a specific form in order to bring the postulated legal effect. Oral form, written form and the form of a notarial deed are the most popular ways of submitting a declaration of will - concluding a contract.

Moreover, the Civil Code indicates that it is also permissible to submit a declaration of will by behavior that would reveal that will. For example, a handshake gesture can be considered as confirmation of the acceptance of the offer and contractual binding on both parties. It is a form of per facta concludentia. The norms of law, however, reserve certain rigors as to the form of legal acts, which will be discussed later in the article.

Example 1.

Ewa, saying: "Have a cake", made a declaration of will to Magda regarding the conclusion of a donation agreement. As pathetic as it sounds, it was exactly what she did. Magda took a piece of cake, thanking her. The will of both parties to propose and accept a donation was not in doubt and a more formalized form, e.g. in writing, was unnecessary.

The moment of concluding an oral agreement

The moment of concluding an oral contract, as well as any other form of contract, is key to determining the effectiveness of the submitted declaration of will. If the person performing such an action has not yet had legal capacity, for example because he or she is a minor, the contract concluded by him, as a rule, will be invalid. This means that it is considered one that would never be concluded. However, from the moment of submitting a declaration of will by a person who has legal capacity, the applicant is bound by this declaration. Ie. is responsible for them - he or she has to fulfill the obligation or face specific legal consequences. As a rule, such a declaration cannot be revoked.

Example 2.

Oral termination of an employment contract, although defective, is effective according to the Labor Code. However, it requires confirmation in writing.

The so-called service theory is the moment that determines the moment when the declaration reaches the other party. If the statement reaches a party in such a way that it can read the content of the statement, it is made at that moment.

Withdrawal of the submitted declaration of will to another person, e.g. about the acceptance of the offer, will not be possible if the addressee is received later than the declaration of acceptance of the offer. Unless the addressee of the declaration agrees. It is related to the above concept of the moment of concluding the contract. This means that when the declaration of will reaches the addressee, it already produces legal effects. Colloquially speaking, "word has been said…".

Example 3.

Ewa, who is a tenant, submitted a written declaration of intent to terminate the lease by registered mail. It turned out, however, that she wanted to continue renting the premises because her travel plans had been ruined. She emailed the revocation of the termination notice. It reached the landlord sooner than it did via traditional mail, so the former was successfully canceled. If the notice of termination was received first, it could only be withdrawn with the consent of the other party.

Special forms of legal actions

Some activities in law require specific forms. It is therefore impossible in some cases to conclude an oral agreement. The seriousness of the case, securing legal transactions or the need to obtain evidence for a possible dispute before the court obliges to maintain a specific form of legal transaction.

Below, we present the acceptable forms of legal action indicated by Section III of the Civil Code that affect the validity of the concluded contract:

  • Normal written form. It is a handwritten signature on a document with the content of the declaration of will. In this case, the contract was created as a result of signing both parties as their respective written declarations of will. However, it is enough to exchange documents with the signature of the other party. It is also possible to submit such a declaration in electronic form using a secure electronic signature. In the case of people who cannot write, but can read, the signature is replaced by their fingerprint made at the declaration of will, and next to it are the name and surname of that person and the signature of the person helping to do this. Also, the notary or administrative authorities can certify the signature of the person who signs the person who is unable to write.

  • Written form with confirmation of the date. It is an official certification of a date related to specific effects of a legal act.

  • Written form with officially certified signature. The document will contain the content of the declaration of will together with the signatures, and the notary will authenticate the signature.

  • Notarial act. This form has the highest degree of formality. It is to ensure the security of legal transactions. The contract is valid only if it is drawn up in the form of a notarial deed by a notary public.

  • Electronic form - sending an SMS, e-mail or using a secure electronic signature. The printed text of such a message with the indication of its sender may be of an evidential nature.

Example 4.

You can make a will in normal writing. However, if we want it to have the highest degree of formalization, it can be done in the form of a notarial deed. There are also situations when the verbal form of a will will be acceptable. It is admittedly a special form for such an activity, but it is possible with a sufficient number of witnesses to submit such a declaration.

Consequences of not keeping a certain form

The types of a special form according to the consequences of its failure to preserve it are:

  • Under pain of nullity. Failure to comply with the required, specific form, if it is reserved, invalidates the entire legal act and has no legal effects. If the act requires the usual written form for a given activity, the conclusion of an oral agreement in such a case will make the concluded agreement invalid - as if it had never existed.

  • For evidence purposes. If a specific form has been specified, e.g. in writing, failure to comply with it by concluding the contract without signing the relevant documents will not be able to constitute evidence before the court in the event of a dispute. Nobody can prove anything to anyone then. Such an agreement cannot be invoked. However, when the other party agrees to raise the oral agreement as evidence, then it becomes evidence. However, as you know, there is a dispute in court and it would be difficult to accept evidence to your disadvantage. However, it is possible to hear witnesses or listen to recordings, for which the parties must also agree. There is one exception, when in a dispute with an entrepreneur, the consumer has the right to invoke the conclusion of the contract orally.

  • For the production of special legal effects. A contract that does not contain a specific form will not only produce some legal effects, but will be valid in itself.

Elements of an effective legal act and an oral contract

The contract should contain some flagship elements, i.e. minimal content, to be considered valid. Elements can be distinguished:

  • Objectively relevant. Necessary elements, e.g. indicating the subject of the contract,

  • Possible. Neutral, are acceptable, but not necessary, e.g. place of conclusion of the contract,

  • Subjectively important. Reservation as to the legal consequences of the conclusion of the contract for a given person.

Therefore, it should be ensured that the concluded oral agreement specifies at least the basic issues. In the case of, for example, a contract of mandate, it indicated what the subject of the contract would be - what order the person accepts from the ordering party and what remuneration will be related to it. It is also worth mentioning the date. Agreements named in the Civil Code provide specific guidelines for effective binding by both parties.

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Consequences of failure to comply with a specific form - an oral contract, when it should be concluded in a different form

In some cases, failure to comply with the form provided for by the provisions of the Civil Code may result in 3 sanctions:

  • invalidity of the contract (e.g. a contract for the sale of real estate made in writing instead of in the form of a notarial deed is invalid),

  • no possibility of citing as evidence (e.g. an oral contract for the sale of a car will not be able to be used as evidence in the event of a dispute before a court),

  • no legal effects (e.g. termination of the mandate contract over the phone in the case of a provision in the mandate contract that the termination will be made only in writing).

Modes of concluding contracts

Despite the freedom granted by the legislator, he also indicates possible ways of concluding a contract. Lists:

  • the offer procedure (a proposal to conclude a contract and its acceptance by the other party, e.g. the price on a label in the store is binding for the seller and the consumer as a proposal and acceptance of the offer upon going to the checkout),

  • negotiations (all provisions that are being negotiated and discussed in terms of the content of the contract - all its provisions must be accepted by both parties),

  • tender and auction.

Summing up, the legislator gives a lot of freedom in the form of shaping legal relations between entities. For the protection of legal transactions, however, it introduces certain limitations and presents a catalog of forms. Agreements that are more serious in legal terms will always require a written form, even for evidence purposes, or the form of a notarial deed, if they concern real estate.