Is an oral contract legally binding?

Full question:

I entered into an oral contract with a bar owner to take over a kitchen in his bar to provide food for the customers. The bar owner said he wanted to open on a certain date and I bought equipment and was ready to perform before that time. The bar owner didn't get things done in time, so he put off the time of opening to the last week of December. I changed my holiday schedule and he still had not completed tasks that needed to be accomplished to begin. ie; contacting the health department and so on. Two months from the date he wanted to begin passed and he finally got the health department in and needed further people from their department to come in. They did but I was not called, as I am the only person with food preparation experience. Now the bar owner is going to go with another person for the food. I brought samples of my food, I was told I was his choice and did everything I needed to fulfill my end of our oral contract. His employees knew me, told customers while in my presence the kitchen would be open in 2 weeks, had a sign in his bar proclaiming I was going to take over the food preparation. Many of his customers talked to me about the type of food I was going to prepare. It was well known I was going to do the food. My finacee moved from her home in California to be here in Nevada to help me and get the business started. The bar owner and me made an oral agreement I would be listed as an employee for the first six months and at that time, lease the kitchen area and it would be my business in his bar. The previous food business in his bar did approximately $209,000.00 a year in sales, and I know from my prior experience I could meet or exceed that amount. I'm a two time national award winning pizza chef. Each time we talked people around us knew what was happening, and my finacee was present when the bar owner informed me I was his choice. He said he would get with his lawyer to prepare a contract but never did so. I have my equipment stored in his bar, and in his storage units. I have traveled all over the Carson, Reno area buying items and equipment I needed to perform, rented a trailer to haul equipment he has in his storage. Do I have an actionable suit?

• Category: Contracts
• Subcategory: Oral
• Date: 04/07/2025
• State: Nevada

Answer:

The agreement you entered into may be considered a contract and your rights and obligations and whether you will be able to recover in a breach of contract action will depend on the terms of the contract and the court's interpretation of the same.

A contract may be legally defined as a voluntary, legally enforceable, agreement made by persons with the proper capacity. It should include:

1) an offer;
2) an acceptance; and
3) consideration, or an exchange of value.

A contract may be express or implied. A unilateral contract is one in which there is a promise to pay or give other consideration in return for actual performance. A bilateral contract is one in which a promise is exchanged for a promise. A contract is an agreement between two parties that creates an obligation to do or refrain from doing a particular thing. The purpose of a contract is to establish the terms of the agreement by which the parties have fixed their rights and duties. An oral contract is an agreement made with spoken words and either no writing or only partially written. An oral contract may generally be enforced the same as a written agreement. However, it is much more difficult with an oral contract to prove its existence or the terms. Oral contracts also usually have a shorter time period within which a person seeking to enforce their contract right must sue. A written contract generally provides a longer time to sue than for breach of an oral contract. Contracts are mainly governed by state statutory and common (judge-made) law and private law. Private law generally refers to the terms of the agreement between the parties, as parties have freedom to override many state law requirements regarding formalities of contracts. Each state has developed its own common law of contracts, which consists of a body of jurisprudence developed over time by trial and appellate courts on a case-by-case basis. Contracts related to particular activities or industries may be highly regulated by state and/or federal law.

An unjustifiable failure to perform all or some part of a contractual duty is a breach of contract. A legal action for breach of contract arises when at least one party's performance does not live up to the terms of the contract and causes the other party to suffer economic damage or other types of measurable injury. A lawsuit for breach of contract is a civil action and the remedies awarded are designed to place the injured party in the position they would be in if not for the breach.

Remedies for contractual breaches are not designed to punish the breaching party. The five basic remedies for breach of contract include the following: money damages, restitution, rescission, reformation, and specific performance. A money damage award includes a sum of money that is given as compensation for financial losses caused by a breach of contract. Parties injured by a breach are entitled to the benefit of the bargain they entered, or the net gain that would have accrued but for the breach. The type of breach governs the extent of damages that may be recovered. Restitution is a remedy designed to restore the injured party to the position occupied prior to the formation of the contract. Parties seeking restitution may not request to be compensated for lost profits or other earnings caused by a breach. Instead, restitution aims at returning to the plaintiff any money or property given to the defendant under the contract. Plaintiffs typically seek restitution when contracts they have entered are voided by courts due to a defendant's incompetence or incapacity. Rescission is the name for the remedy that terminates the contractual duties of both parties, while reformation is the name for the remedy that allows courts to change the substance of a contract to correct inequities that were suffered. In order to have a rescission, both parties to the contract must be placed in the position they occupied before the contract was made. Courts have held that a party may rescind a contract for fraud, incapacity, duress, undue influence, material breach in performance of a promise, or mistake, among other grounds. Specific performance is an equitable remedy that compels one party to perform, as nearly as practicable, his or her duties specified by the contract. Specific performance is available only when money damages are inadequate to compensate the plaintiff for the breach.

Promissory estoppel is a term used in contract law that applies where, although there may not otherwise be an enforceable contract, because one party has relied on the promise of the other, it would be unfair not to enforce the agreement. Promissory estoppel arises from a promise which the promisor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of the promisee and which does induce such action or forebearance in binding if injustice can be avoided only by enforcement of the promise.

Detrimental reliance is a term commonly used to force another to perform their obligations under a contract, using the theory of promissory estoppel. Promissory estoppel may apply when a promise was made; reliance on the promise was reasonable or foreseeable; there was actual and reasonable reliance on the promise; the reliance was detrimental; and injustice can only be prevented by enforcing the promise. Detrimental reliance must be shown to involve reliance that is reasonable, which is a determination made on an individual case-by-case basis, taking all factors into consideration. Detrimental means that some type of harm is suffered.

Reasonable reliance is usually referred to as a theory of recovery in contract law. It was what a prudent person might believe and act upon based on something told by another. Sometimes a person acts in reliance on the promise of a profit or other benefit, only to learn that the statements or promises were either incorrect or were exaggerated. The one who acted to their detriment in reasonable reliance may recover damages for the costs of his/her actions or demand performance. Reasonable reliance connotes the use of the standard of ordinary and average person.