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In business and legal contexts, agreements can take many forms. Often, written contracts are preferred for their clarity and ease of reference. However, verbal contracts can still be legally binding, provided certain conditions are met.

So, what defines a verbal contract? At its most basic level, a verbal contract is an agreement reached between two or more parties without a written record. These agreements can take many forms – for example, a handshake agreement between two business partners, or a verbal agreement to sell a car between two friends.

However, for a verbal contract to be legally binding, certain factors need to be in place. Here are some of the key things that define a verbal contract:

1. Offer and acceptance

Like any contract, a verbal agreement requires an offer and acceptance. This means that one party must make an offer to another, and the other party must accept the offer. For example, if someone offers to buy a car for $10,000 and the other party accepts, a verbal contract is formed.

2. Consideration

Another key requirement for a verbal contract is consideration. This means that both parties must receive something of value in exchange for their agreement. In the car example, the buyer would receive the car, and the seller would receive the $10,000 payment.

3. Intent to create a legal relationship

For a verbal agreement to be legally binding, both parties must intend to create a legal relationship. This means that they must understand that the agreement has legal implications and that they may be held accountable for fulfilling their obligations. For example, if a business owner verbally agrees to hire someone, both parties must understand that the agreement is legally binding.

4. Clarity and certainty

Finally, for a verbal contract to be legally binding, the terms of the agreement must be clear and certain. This means that both parties must be able to understand and agree on the terms of the agreement. For example, if two people verbally agree to split the profits of a business 50/50, there must be no confusion or ambiguity about what constitutes “profits” and how they will be split.

Overall, while written contracts are generally preferred in business and legal contexts, verbal agreements can still be legally binding if certain conditions are met. However, it`s important to remember that verbal contracts can be difficult to prove and enforce, so it`s always best to get agreements in writing whenever possible.

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