Limitations and drawbacks of Oral contracts

Lawyers sometimes encounter resistance from clients when they propose executing written contracts. Clients often assume that lawyers suggest written contracts for their own commercial benefit. However, this assumption couldn’t be further from the truth. In reality, oral contracts hold the same legal validity as written ones. Nevertheless, there are several reasons why oral agreements are generally considered less reliable than their written counterparts.

1. Lack of Evidence: Oral agreements rely solely on verbal communication and don’t leave a tangible paper trail. The absence of written documentation makes it challenging to prove the existence and terms of the agreement, leading to disputes and difficulties in enforcement.
2. Memory and Interpretation: Human memory is fallible, and different parties may have varying recollections of the details discussed in an oral agreement. Over time, memories can fade or become distorted, resulting in disagreements about the actual terms agreed upon. Additionally, individuals may interpret the terms differently, causing conflicting understandings of the agreement.
3. Difficulty in Enforceability: Without a written contract, enforcing an oral agreement can be challenging if one party fails to fulfill their obligations or if a dispute arises. In these cases, it becomes a matter of one party’s word against the other, making it harder to provide concrete evidence and seek legal remedies.
4. Potential for Misunderstandings: Oral agreements are more susceptible to misunderstandings, miscommunications, and errors. Without clear and precise terms documented in writing, there is a higher likelihood of misinterpreting or forgetting important details, leading to disagreements and conflicts between the parties involved.
5. Complexity of Terms: Some agreements involve intricate terms and conditions that are difficult to remember accurately or convey accurately in oral form. Written contracts allow for the inclusion of all necessary details, definitions, and provisions, ensuring that the parties have a shared understanding of the agreement.
6. Lack of Formality: Oral agreements often lack the formalities that come with a written contract. Written contracts typically include elements such as signature lines, dates, stamping, registration, notarization, and witness requirements, which establish the seriousness and commitment of the agreement. This formal nature also helps make enforcement easier.

Stamping, Registration, and Filing Requirements: Certain laws mandate specific instruments to be registered and require payment of stamp duty. Moreover, auditors, various authorities, and government departments may require agreements to be filed. The absence of a written contract can impede their review and approval of the agreement between the parties.

In conclusion, while oral agreements may be legally binding in specific circumstances, they are generally considered less reliable due to the lack of evidence, potential for memory and interpretation errors, difficulties in enforceability, increased risk of misunderstandings, and the absence of formalities. Written contracts provide a more secure and enforceable framework for documenting and upholding the terms of an agreement.