Informal Contract

Also known as: Simple Contract

In one sentence

A contract that does not require special formalities and can be binding even if made orally or casually.

Plain English

An informal contract (also called a simple contract) is one where the parties don't need to follow any special procedures to make it binding. You can create an informal contract with a handshake, a phone call, or an email. As long as both parties intend to be bound and the basic elements of a contract are present (offer, acceptance, and consideration), it's enforceable. Most everyday business deals are informal contracts.

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Example

You call a plumber and say "Can you fix my sink tomorrow for $150?" The plumber says "Yes, I'll be there at 10 a.m." You have an informal contract—no paperwork needed. The plumber is legally obligated to show up, and you're obligated to pay.

Used in a sentence

“The informal contract between the two neighbors to share the cost of a fence repair was binding even though it was never written down.”

Related terms

Mutual Assent

Both parties agree to the same contract terms at the same time.

Capacity

The legal and mental ability to enter into a binding contract.

Performance

The act of doing what a contract requires, such as delivering goods or paying money.

Good Faith and Fair Dealing

A legal duty to act honestly and fairly when making and performing contracts.

Legal Value

Something of worth in the eyes of the law that can support a binding contract.

Executed

A contract in which both parties have fully performed all their obligations.

Offer

A proposal to enter into a binding agreement on specific terms.

Acceptance

Agreeing to the exact terms of an offer, creating a binding contract.

This page is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.