 In this video for sub-sub-unit 4.3.6, we examine how a contract can be formed by spoken word. In other words, an oral contract. So how can a contract be formed by spoken word without a writing and the possible limitations of such a contract? In this video we will determine the definition of an oral contract. The distinctions between oral contracts and written contracts. Issues to consider in oral contracts. And we'll revisit something you may remember from earlier in this unit. The statute of frauds. Statute of frauds. You might take a minute to ask yourself, what is it that the statute of frauds does in relation to contracts? What are the requirements of the statute of frauds? When you think about a contract, what comes to mind? If you're like most people, you think about something in writing. Maybe you have filled in a form and signed it and realized that you were engaging in a contract. You might even think a contract has to be in writing. Many people do. An old saying goes an oral contract is as good as the paper it's written on. In reality, oral contracts are every bit as enforceable as written contracts. Every bit is enforceable. So what is an oral contract? Well, very simply, an oral contract is a spoken word contract. It's a contract formed by spoken word. Now why do you think there is such an emphasis on written contracts? Ask yourself, why is it most people prefer written contracts to oral contracts? Well, part of it is proof. It's easier to prove a written contract than an oral contract. Factfinder is going to look to the writing and the terms are written out. Much easier to figure out what's going on. In an oral contract, however, there's often a lot more ambiguity. A lot more ambiguity. So you might want to consider how would you go about proving an oral contract? Take a second to think about that. One way to do it would be admissions by the other party. If the other party essentially admits to an oral contract, you have a contract. You might also consider witnesses. Witnesses who can say what was said in the formation of an oral contract. You might look to notes or other writings indicating the thoughts or intents of the party. You might also look to actions. For example, X gives Y, car, Y gives X $1,000. Let's say there's a problem. The car doesn't work. Y says there's been a breach of contract, an oral contract. The actions of each party here do indicate and probably would to a factfinder that a contract has been made. One last issue that often plays a big role in any case, particularly in an oral contract case, is credibility. Credibility of the parties can be key. Everything turns on being able to demonstrate, as with any contract, the intent. Again, just to review, a court is going to want to look to the intent of the parties in an oral contract case by looking at, for instance, witnesses, the testimony of witnesses, any notes again. And judging the credibility of the parties, these are all going to be significant factors. One more problem to consider with oral contracts is the statute of limitations in many states in the United States is shorter for oral contracts. So we have a shorter statute of limitations. If you have an oral contract, it's breached. You will have to act more quickly to bring a cause of action, to bring an action on that case. Okay, lastly, let's again reconsider the statute of frauds. The statute of frauds. And think about what you've already learned about the statute of frauds. What's required? Well, requires certain contracts must be in writing. And if they're oral, they generally won't be enforced. So for example, again, try and recall some of the types of contracts that might need to be in writing under the statute of frauds. Guaranteeing another's debt. Contract for guaranteeing another's debt has to be in writing. Contract that cannot be performed in one year. So contract that is not capable of being performed in one year or less. The most notable one probably is a contract for transferring an interest in land. And the UCC gives us contracts for sales of goods that are worth $500 or more. $500 or more. So those are typically some of the contracts that must be in the statute of frauds. And again, there should be some element of review for you there. So in this subunit, we've looked at oral contracts. We've established what an oral contract is. We considered differences between oral contracts and written contracts. Talked about some of the issues, unique to oral contracts, and reviewed the impact of the statute of frauds.