In India, most people work on the basis or oral understanding based on goodwill and written agreements are often an exception rather than a norm. These Oral Agreements are valid as per Indian Law (bound to some conditions). However, it is not of great evidentiary value as it can be vague and based on second hand knowledge. In case of a dispute it becomes difficult for the court to obtain the case facts.
Oral agreements consist of words, gestures, symbols by which one party conveys a promise or a set of promises to another, which, on acceptance by the other party, becomes a valid oral agreement. They may be express or implied in nature.
These agreements are enforceable in the court of law given that they contain the essentials of a contract specified under Section 10 of the Indian Contracts Law, 1872. These include Proposal, Acceptance, Lawful object, Lawful consideration and Capacity to contract.
Validity of an Oral Agreement
Validity of an Oral Agreement has been upheld by the courts in several cases. In the case of Nanak Builders and Investors Pvt. Ltd. vs. Vinod Kumar Alag AIR 1991 Delhi 315, whereby the Court held that even an oral agreement can be a valid and enforceable contract. Therefore, in the strict sense, it is not essential that a contract must be in writing. Similar conclusion was reached by the court in the case of Sheela Gehlot vs. Sonu Kochar & Ors. Further , the court also noted that for the agreement should be in tandem with the essentials listed in section 10 of the Indian Contract Act, 1872 and thus, will have the equal force of evidentiary value, as a written one.
Admission of an Oral agreement as Evidence
Under Section 92 of the Evidence Act, an Oral agreement will not be held as evidence if the terms of the contract are reduced to the form of a document. But its proviso (2) makes an exception to that if there is any separate oral agreement as to any matter where the document is silent and the terms are inconsistent, then the oral agreement may be proved valid.
In the case of S.V. Narayanaswamy vs. Savithramma, the Appellant had to prove the existence of a oral agreement with respect to sale of property. The appellant did so by producing cheques of several amounts, towards the entire consideration of the property. By producing various pieces of evidence, which indicated towards a whole, the court upheld the existence of the oral agreement, based on the scrutiny of the evidence provided
Hence , Oral agreements are valid and can be evidenced in a court of law. However it is always recommended to have contracts in writing. Oral agreements are very tricky to prove and require all the evidence to be explicit and to point in a particular direction.
Business Management 