oral contract

An oral contract (also referred to as a parol contract) is a legally binding agreement formed through spoken words rather than written documentation. Oral contracts are generally enforceable; however, their validity is limited by statutes of frauds, which require certain types of agreements to be in writing. These laws vary by jurisdiction and typically apply to contracts involving the sale of land, leases exceeding one year, or agreements that cannot be performed within one year. Under the Uniform Commercial Code (UCC), sales of goods priced at $500 or more also generally require written evidence.

For example, California Civil Code § 1624 provides that contracts for the sale of real property, long-term leases, and agreements not performable within one year must be in writing to be enforceable. California law recognizes limited exceptions for qualified financial contracts if sufficient evidence establishes the agreement’s existence or if a written record, created before or after the transaction, confirms the parties’ intent to be bound.

[Last reviewed in October of 2025 by the Wex Definitions Team] 

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