Is an oral "contract" legally binding?

Question

In a comment to this question, the user @Agent_L argued that

That's not an opinion, there is nothing to disagree here. From a legal point of view, a contract doesn't need a written form. It's hard to prove the existence of such contract, but it's still there

Is this true, legally? If, for example, a person A offers a job to a person B orally, and person B accepts it orally, and person A records this conversation. Can person A later use this recording to sue person B if later person B doesn't want to work there?

Answer 1

If an offer is accepted, you have a contract

Oral contracts are binding for most transactions.

See What is a contract and what is required for them to be valid?

However, from the circumstances, it’s not clear that there was an offer subject to acceptance. Had the wages been agreed? The hours of work? The annual leave? The sick leave? If these were undetermined then there is no contract.

Answer 2

In principle, oral contacts are binding, but your example has several issues that make it quite poor:

• in many states in the US, employment is 'at will' which means it can be terminated at any time for any or no reason. So you 'enforcing' the employment contract is only binding for the second it takes to say 'you're fired'.
• second, recording a conversation without consent is in many (of not all) states illegal, and gets you in jail, not into employment.

Aside from that though, many legislations, also outside the US, agree with that verbal contracts are binding.
They might be hard to prove and enforce, but remember this concept comes from the time when 'a man's word' was considered to be binding and a question of honor to keep.

Answer 3

Although there's already a very good accepted answer, I would like to add some information that might help people understand why things work the way they work.

Contracts are simply wills of parties coming together in agreement. For as long as there are parties who wish something and these wishes come together as an agreement, there is a contract. This is generally true, regardless of jurisdiction, and scope. This is because contracts have meaning even outside the legal framework. Which leads us to contract law.

Contract law is in fact a contract as well. The contract law contract came as an agreed will of the members of a community (parties) to have means of enforcing contracts.

Enforcement of contracts is a completely different concept from the contracts themselves. In contract law, the community agrees what they wish to enforce by taking into consideration a wide range of aspects like impact and practical enforceability, and that's why a real-estate contract usually has to be in written form, maybe even notarized, while supermarket transactions only require verbal, or even non-verbal non-written contracts.

On top of contract law, there are usually a lot of other contracts (laws) that delegates enforcement of lower level laws. These are the civil code, penal code, etc in civil law countries, and also court-cases in UK and a few of their former colonies.

Since the entire legal system is a contract, it follows that contracts are requirements for the existence of legal systems, and not the other way around. The most important aspect of all of the above is that contracts transcend legal systems. Enforcement of contracts though doesn't and it is defined within a legal system as a contractual clause.

All contracts are binding, as long as they are indeed contracts. The law provides guiding for what is not a contract, in order to prevent useless lawsuits. E.g. if I say in a pub "I bet Liverpool is going to win this year" and someone in the bar nodes, it's just a way of expressing my feelings about Liverpool's game play, without any obligations on my side to actually bet, hence not-a-contract. Similarly, jokes are not contracts, swears are not contracts (FU doesn't bind me to anything, even if you agree).

So, all contracts that are indeed contracts are binding, but only some are enforceable (as stipulated by law), and out of those, only some are easy to enforce (written notarized contracts).

Answer 4

Obviously, it depends on the legislation. In German legislation, an oral contract is binding by default. A contract is defined as

two congruent declarations of intention, issued in regard to each other (proposal and acceptance).

On principle, these declarations can be oral, written, or implicit statements. Due to the latter it's even possible to conclude a contract without saying or writing anything.

To be a declaration of intent, the statement needs to be the disclosure of a will to induce a legal consequence. Furthermore, the statement needs to be determined enough to be accepted by a simple yes (or nodding, for instance). For that purpose, it needs to comprise the essentialia negotii. These minimum contents depend on the type of the contract.

In case of a labor contract, the essentialia negotii would be the two contracting parties, the salary, the working hours and the job that is to be done. All the other conditions, for instance the paid leave and the period of notice, would result from the statutory minimum provisions (which aren't that bad for the employee, e.g., 20 days paid leave p.a. in case of a five-day week).

However, there are some restrictions to it. E.g., a temporal limitation is only valid if arranged in written form. This is to protect the weaker contracting party, in this case the employee. In the work contract example, an intended fixed-term employment would automatically become a permanent one due to violation of form. Same applies for lease contracts of living space: they can be concluded orally, but a temporal limitation will be legally void, rendering the lease permanent.

Other restrictions affect specific types of contracts, e.g. gift contracts must be notarized to be enforceable.