Acquisition Law and Oral Contracts

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Many individuals do not understand the full significance of the terms outlined in a contract until they find themselves at the receiving end of litigation. In addition, they do not recognize that a contract can be established with as little as a verbal agreement between parties which can, as with a written contract, become the basis to award damages in the event that one or more members default on the agreement. When individuals make purchases they form contracts with the entity whose business they patronize. Formation of a contract for sale need only entail an offer and acceptance between parties and is legally binding when agreement and consideration are ascertained. The purpose of this paper is to address legal considerations one should take into account when making oral purchases in the marketplace.


Bob is on his way home from work when he spots his neighbor Sam selling old items at his garage sale. Bob walks over and sees a toolset for sale for $50. Bob wants to buy the toolset but doesn’t have the money to give Sam for it until next Thursday. He asks Sam if he would be willing to hold on to the toolset for him until next Thursday so he can buy it and Sam agrees to sell it to him. By offering to purchase a good from Sam and having his offer accepted, Bob has entered into an oral contract with Sam. Such transactions occur regularly between parties but individuals often have a carefree attitude toward oral contracts because there is nothing written and signed to seal an agreement. The assumption is since an agreement isn’t documented it isn’t enforceable but this is not always the case. The law recognizes oral contracts just as they do with written contracts. My research delves into the attributes that necessitates a legally binding contract and the consequences people can face should a participating member default on a promise made in an oral agreement or, in this case, an oral purchase.

Oral Purchase = Oral Contract

“A contract is a legally enforceable agreement between two or more parties. The core of most contracts is a set of mutual promises (in legal terminology, "consideration"). The promises made by the parties define the rights and obligations of the parties. Contracts are enforceable in the courts. If one party meets its contractual obligations and the other party doesn't ("breaches the contract"), the non-breaching party is entitled to receive relief through the courts.” (Radcliffe and Brinson, 1999) Written contracts are tangible documents that validate an established agreement between parties. Contracts that are formed from statements spoken between people are not as obvious. If you agree to do something, sell something, or buy something and someone else acts on your statement, it is likely you have formed an enforceable contract. Oral contracts are considered ‘Invisible Contracts’ because people are often unaware that they have entered into a binding agreement with another party based simply on the statements they have made. Article 2 of the Uniform Commercial Code (U.C.C) Section § 2-204 Formation in General specifies the standards in forming a contract: “(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including offer and acceptance, conduct by both parties which recognizes the existence of a contract, the interaction of electronic agents, and the interaction of an electronic agent and an individual.

(2) An agreement sufficient to constitute a contract for sale may be found even if the moment of its making is undetermined.

(3) Even if one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.” (U.C.C 2005) Oral contracts are one of the most common forms of agreement used between two or more parties. The problem with an oral contract however, is that if any problems should...
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