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Is an oral contract valid?

If you have a business in Illinois, you may use many different types of contracts. One such type is an oral contract. This is simply an agreement you talk over with someone else where you both agree to terms and the exchange of something valuable. It is the same as a written contract except that you did not write anything down or sign anything. You may wonder just how binding this type of contract is.

According to the Illinois Uniform Commercial Code, an oral contract may be valid only in specific situations. In general, an oral contract works if the value of the goods or services is not over $500. Anything over that value requires a written contract if you wish to dispute or enforce it.

However, there are always exceptions. You may be fine with an oral agreement if you make goods specifically for the other party that you cannot sell to someone else. If you end up in court and the other person admits there was an oral contract, this would also make your contract valid.

In general, though, you always want a written contract, especially when dealing with high amounts of money or a high value. A written contract will protect you and the other party. It makes for a better working relationship and will allow you to ensure the contract is seen to fulfillment. If something goes wrong, it is much easier to dispute a written contract than it is an oral one. So, keep all that in mind when you are tempted to use only an oral contract. This information is for education. It is not legal advice.