DEFINITION of 'Oral Contract'

A type of business agreement that is spoken, not memorialized in writing. Although it can be difficult to prove the terms of an oral contract in the event of a breach, this type of contract is legally binding.

BREAKING DOWN 'Oral Contract'

A famous example of the enforceability of an oral contract occurred in the 1990s when actress Kim Basinger backed out of her promise to star in Jennifer Lynch's film "Boxing Helena". A jury awarded the producers $8 million in damages. Basinger appealed the decision and later settled for a lower amount, but not before having to file bankruptcy.


Oral contracts are often mistakenly referred to as verbal contracts, but a verbal contract is really any contract since all contracts are created using language.

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