A verbal, or oral, contract is just as important and enforceable as a written contract. While many states have a statute of frauds law listing the types of contracts that must be written to be enforced, outside of these exceptions, oral contracts are just as enforceable as written contracts. If you enter into an oral contract which you then breach by not holding up your end of the bargain or by making it impossible for the other party to hold up his end of the bargain, you can be sued. If successfully sued, you will likely have to pay damages to the other party.
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Perhaps the origin of the myth that an oral contract is not worth as much as a written contract stems from the difficulty of proving the terms of a contract that was not written down or otherwise recorded. There are alternatives, however, to writing the terms down. If there was a witness to the oral agreement, he may testify in court about the terms of the contract.
One of the biggest problems associated with proving that a breach of an oral contract has occurred is that, unlike a written contract, the terms of an oral contract are often less precise about the obligations each party is bound to fulfil. If it cannot be proved that a person had an obligation to do something, then the person cannot be held in breach of contract for failing to do so. Furthermore, even if the terms were precise, both parties must rely on their memories, which can be unreliable.
Depending on the amount of damages demanded by the plaintiff, you may be sued in a small claims court or a trial court. Small claims courts are available for cases in which the plaintiff demands between £975 and £9,750, depending on the jurisdiction. If the amount demanded by the plaintiff exceeds this limited amount, you may be sued in a trial court. Trial courts are much more formal and involve a more complicated process. You are not required to hire a lawyer and may represent yourself at a trial court.
If you are found in breach of contract, you will likely have to pay damages to the plaintiff. There are four kinds of damages that may be awarded. Compensatory damages place the plaintiff in the situation he would be in if the breach had not occurred. Nominal damages are a token award used to indicate that the plaintiff won the court battle, but they might not include any money. Liquidated damages are damages that were agreed to at the time the contract was entered into. Finally, punitive damages are meant to punish the breaching party.
Statute of Limitations
If you are in breach of an oral contract, the plaintiff -- to successfully sue you -- must act within the statute of limitations. These deadlines change from jurisdiction to jurisdiction and from case to case. If the deadline passes, you may longer be sued for breaching the contract in question.
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