08 | 10 | 2006 Posted By James Streett
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Requirements for Creation of an Enforceable Oral Contract

Oral contracts are always a dicey business, and establishing their existence and enforceability almost always turns on the testimony and credibility of the party seeking to enforce the contract.  However, while establishing such a contract will almost always be a fact-specific inquiry, Tennessee Courts have provided a basic legal framework for engaging in this inquiry.  A good summary of this framework was recently provided by the Court of Appeals in Humphrey v. TomKats, Inc.: 

An oral agreement is enforceable, but the party seeking to enforce it must prove (1) mutual assent to the contract's terms and (2) that the terms are sufficiently definite to be enforceable.

 

A manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.

 

The terms of a contract are reasonably certain if they provide a basis for determining the

existence of a breach and for giving an appropriate remedy. 

 

The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.

Accordingly, while the existence and enforceability of an oral contract will usually boil down to issues of credibility, the party seeking to enforce the contract must remember that, in some form or fashion, they have an affirmative and definite obligation to establish (1) mutual assent and (2) sufficiently definite terms.

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