Oral Agreement
Definition and meaning of Oral Agreement in real estate.
An oral agreement is a spoken contract between two or more parties that is not put into writing. In real estate, oral agreements are generally unenforceable due to the statute of frauds, a legal rule requiring all property transfers and long-term contracts to be in writing.
In more detail
The statute of frauds is designed to prevent fraud and misunderstandings by requiring written contracts for transactions involving the sale of real estate, easements, or leases lasting longer than one year. If a buyer and seller agree to a purchase price over a handshake, neither party can force the other to close the transaction in court.
Some short-term residential leases lasting less than one year may be legally binding as oral contracts in many states, but they are still difficult to prove. For a real estate contract to be valid and enforceable, it must be written, signed by all parties, and clearly state the terms.
Key facts
| Category | Legal, Titles & Closing |
|---|---|
| Validity | Generally unenforceable for real estate sales and long-term leases |
| Legal rule | Subject to the statute of frauds |
| Applies to | Handshake deals and verbal promises |
A landlord and a tenant agree verbally to a multi-year lease term, but because the agreement is not written down, it is legally unenforceable under state law.
Frequently asked questions
Are verbal promises made during home negotiations legally binding?
No, verbal promises are not binding in real estate transactions, as all agreements must be written into the contract or added as signed amendments to be enforceable.
Can a month-to-month lease be an oral agreement?
Yes, in many states, oral agreements for residential leases lasting less than one year are legally binding, though they are still highly discouraged because disputes are difficult to resolve.