Valid oral Contract by Vanshika Chauhan at LEXCLIQ

Valid Oral Contract

Although oral contracts are difficult to enforce in court, the parties should make a concerted effort to discuss enforceability, which can be achieved by incorporating the following elements:

– Mutual consent and understanding,

– Offer and acceptance

– Mutual consideration,

– Performance,

– Good faith

So what can be done in such cases?

If you have an oral contract and want to enforce it against the other party, one way to do it is by collecting evidence.

Acceptability of oral agreement under Indian contract act

On the validity of oral agreements while dealing with several cases the courts recognised the acceptability of oral agreements once they were found to be fulfilling the essentials provided in section 10. As we see in the case of Alka Bose vs. Parmatma Devi & Ors [CIVIL APPEAL NO(s). 6197 OF 2000], the Supreme Court by coming to the conclusion of the case observed that how oral agreements are valid. A sale agreement can be oral also and valid. It is not necessary that agreement should be written, what is more important is that it should be within the ambit of Section 10 of the Indian Contract Act. All oral and written agreements will be valid if they fulfil the conditions specified in Section 10.

Section 10. What agreements are contracts

All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

Then in the case of Sheela Gehlot vs. Sonu Kochar & Ors 2006(92) DRJ 498 Delhi High Court observed that oral agreements are valid and enforceable and there could be no dispute about it. Until there is anything which needed to be written, an oral agreement will enforce. Further for a contract, there has to be some proposal and acceptance. And for the oral agreement, there should be some circumstances surrounding the alleged oral agreement. No one can question the oral agreement as invalid.

Judicial pronouncements on the burden of proof

In the case of S.V. Narayanaswamy vs. Savithramma 2013R.F.A.No.1163 of 2002 c/w R.F.A.No.1164 of 2002 Karnataka High Court, appellant successfully proved the existence of an oral agreement. The appellant filed the case for specific performance of sale agreement. The sale agreement was oral in nature. Appellant showed the cheques given by the respondent for the consideration of the subject matter. Respondent willfully acted towards the agreement. Even from the witnesses who were examined, it was clear that there was an agreement between the appellant and respondent. After considering the shreds of evidence produced by the appellant, the court held that there was an oral agreement between the two. The cheques were shown as an evidence that entire considerable amount was paid. This clearly proves the oral agreement.

Scope of arbitration in Verbal Contract

Arbitration cannot be carried out in a verbal contract as well without an explicit mention of it and mutual consent of both the parties beforehand.

In M R Engineers and Contractors Private Limited v Som Datt Builders Limited3 (M R Engineers case) the Supreme Court held that since there is no special reference to the arbitration clause in the standard T&C, the arbitration clause cannot be said to have been incorporated into the purchase order.


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