Historically, contracts laid the foundation to the economic and social relationships of people. Contracts regulate responsibilities and obligations of parties involved in the contract. At the same time, there are risks which accompany contracts since often parties do not fulfill contracts properly that leads to contradictions between parties. In such a situation, conflicts can be solved either by the agreement of the parties involved in the conflict or by the court’s rule, which clearly defines which party is right. In this respect, it should be said that under certain circumstances parties can claim that there are no considerations in the contractual sense of word.
For instance, when two parties signed a contract on the provision of services, such as the design of interior of a house. On the one hand, there is a customer who orders the service, i.e. developing of a design of a house, while, on the other hand, there is another party that provides the service, i.e. an interior designer. In terms of the contract parties should clearly identify terms and conditions of the fulfillment of the work and the object of the work, i.e. the interior design. However, it is important to remember that an interior designer creates a project and it may meet the interior design an architect would like to have, but it may have the combination of colors, which the designer believes to be more appropriate to the specific part of a house. As a result, the interior designer can claim that the project he or she has created is the basis for the interior design while he or she has the right to implement this project, using details he or she considers to be the most appropriate, but the architect can claim that are no considerations in the contractual sense of the words concerning the right of the interior designer to implement the project as he or she actually wants because it should be implemented strictly in accordance with the plan.
The use of an oral contract is accompanied by a number of risks and dangers which can threaten to the legitimacy of the contract. In fact, the oral contract can exist between individuals, while companies tend to sign contracts on a written or printed basis. Moreover, oral contracts are not always legitimate and, therefore, it is necessary to be very carefully with application of this form of contracts. This means that oral contracts can be applicable in one state but they may be inadmissible in another. In addition, it is important to remember about the fact that an oral contract needs the presence of witnesses who can prove that parties have come to the agreement on the subject and all the points of the contract. In fact, it is a major condition which proves that an oral contract does exist and is legitimate. Otherwise, it will be practically impossible to prove that there was a contract between parties, if there were no evidence or witnesses. As a result, either party can simply deny the existence of a contract and refuse from the fulfillment of its obligations defined by the oral contract.
Furthermore, an oral contract is not always applicable. What is meant here is the fact that often an oral contract cannot be applied to deals which have a substantial material value. For instance, a purchase of a house or some facilities normally needs signing a contract which is registered and signed by both parties. In such a situation, an oral contract can hardly be applied because of its low reliability and large possibilities for the parties to refuse from fulfillment of their obligations defined by an oral contract.
At the same time, an oral contract can be successfully applied when parties are involved in the development of a new product or service and the permanent coordination of actions from the part of a company or individual fulfilling the order and the customer is needed. For instance, an architect and a customer, who wants to build a house, can have an oral contract concerning the details of the contraction of a building. For instance, they can sign a contract that the architect develops a project of the building, define the size of the building, a number of rooms, and major elements of the building. However, they may admit an oral contract in terms of which the customer and the architect can agree to introduce changes in the project of the house if both of them agree on such changes. For instance, the customer can ask an architect to enlarge a room in the house and the architect may agree if such a change will not influence the normal construction and maintenance of the building. In fact, there may be insignificant details which the customer would like to choose and to make such changes it is possible to sue an oral contract because the subject of this contract is not crucial for the overall project and signed contract.