Introduction
In modern contract law and the dynamic functioning of commercial life, the ways contracts are formed gain diversity day by day. The speed of daily life, the intensity and time-consuming nature of legal processes, and the relationship of mutual trust between the parties lead individuals to establish obligations through oral declarations of intent rather than creating written documents. Oral contracts refer to legal transactions established through the mutual verbal communication and declarations of intent of the parties without being put into any written document. In both national legal systems and international commercial customs, oral agreements are accepted as legally binding within certain limits. In this article, the legal validity of oral contracts, the principle of freedom of form, exceptions to this freedom, and auxiliary evidence mechanisms that can be used in resolving disputes will be discussed.
1. Freedom of Contract and Principle of Freedom of Form
The concept of “freedom of intent”, which constitutes one of the cornerstones of law, refers to the authority of individuals to freely regulate their own legal relationships. The most concrete example of this authority is the freedom of contract. The parties have the right to form a contract on any subject and in any manner they wish, provided that it does not violate mandatory provisions of the law, morality, public order, and personal rights.
In this context, the general rule is the principle of “freedom of form”. According to this, unless there is a provision to the contrary in the law, the validity of a contract is not subject to any requirement of form. The parties may declare their intentions in writing, officially, or orally. An oral agreement creates a legally full, binding, and valid obligation relationship in all areas where the law does not seek special protection or an official procedure. Therefore, the mere fact that a contract has been made orally does not mean that it is an invalid transaction on its own. The obligation relationship comes into existence upon the concurrence of the mutual and matching declarations of intent of the parties.
2. Elements and Binding Nature of the Contract
For a contract to be validly established orally or in writing, the presence of certain constituent elements is mandatory. These elements can be listed as follows:
- Proposal (Offer): It is the proposal submitted by one party to the other with the intention of establishing a legal relationship. The offer must contain the essential elements of the contract.
- Acceptance: It is the declaration of intent notifying that the opposing party accepts the offer presented to them unconditionally and without any modification. Consent is formed with acceptance, and the contract is established.
- Subject Matter of Contract: It is the legally protectable and performable interest that constitutes the subject matter of the rights and obligations imposed on the parties by the contract.
“It must be emphasized with importance that it is not legally possible to withdraw from an oral contract without a justified reason or contrary to the principles determined in the contract. Oral contracts bind the parties just like written contracts. Non-fulfillment of contractual obligations is called ‘breach of contract’ in legal terminology, and this situation gives rise to the obligation of the defaulting party to compensate for the damages suffered by the opposing party.”
3. Exceptions to Freedom of Form and Cases of Invalidity
The principle of freedom of form is not an absolute rule, but has been subjected to certain exceptions by lawmakers to protect public order, prevent parties from making hasty decisions, and ensure legal certainty. If contracts that the law explicitly orders to be made in “written” or “official” (notary public, land registry office, etc.) form are concluded orally, these agreements are accepted as ‘null and void’ or “definitely invalid” in the legal realm.
A. Contracts Subject to Official Form by Law
The validity of some transactions depends on being executed before official authorities authorized by the state. For example, promise to sell real estate (house, land, field) contracts are required to be made in the form of an official deed before a notary public. The transfer of ownership of real estates gains validity only when carried out officially at land registry offices. Similarly, sales of motor vehicles being made via an official contract before a notary public is an absolute condition of validity. Oral agreements made in these areas generate no legal consequences.
B. Contracts Subject to Strict Written Form
The law stipulates that some contracts be established through qualified written texts executed among the parties themselves. Prominent examples are as follows:
- Guarantee/Suretyship Contracts: It is mandatory that the maximum amount for which the guarantor is responsible, the date of guarantee, and if any, the statement regarding being a joint and several guarantor be written in the guarantor’s own handwriting. Oral guarantee declarations that do not carry a written quality containing these elements are completely invalid. (TBK Art. 583 – A suretyship contract shall not be valid unless made in writing and unless the maximum amount for which the surety will be liable and the date of suretyship are specified.)
- Non-Compete Contracts: Activity limitations and commitments not to compete undertaken by company partners against each other express no legal effect unless made in writing. (TBK Art. 444: An employee having capacity to act may undertake in writing against the employer to refrain from competing with them in any manner after the termination of the contract, especially from opening a competing enterprise on their own account, working in another competing enterprise, or entering into another kind of interest relationship with a competing enterprise outside these.)
- Company Share and Stake Transfers: In limited liability companies, the presence of a notarized written contract and the approval of the general assembly of the company are mandatory for the transfer of a partnership share. Oral transfer of company shares is legally invalid. (TTK Art. 595: Transfer of basic capital share and transactions giving rise to the obligation of transfer are made in written form, and the signatures of the parties are certified by a notary.)
4. Boundaries of Oral Agreements in Terms of Law of Evidence
Although oral contracts are theoretically valid, the biggest problem in practice emerges at the point of “provability”. When a dispute is carried to judicial authorities, the court primarily investigates not the abstract validity of the agreement, but concretely whether it “exists” and its “content”. The burden of proof belongs to the party deriving rights in their favor from the alleged fact. The complainant or plaintiff alleging the existence of an oral agreement is obliged to prove this allegation with lawful evidence in case of denial by the opposing party.
A. Obligation of Proof by Deed/Document and Prohibition of Proof by Witness
Rules of procedural law have prohibited proving transactions above a certain monetary value by way of “witness statement (witness)” in order to ensure legal certainty. In obligation relationships above the annual limit of proof by deed determined by law, hearing witnesses is as a rule not possible unless there is explicit and written consent of the opposing party. Therefore, attempting to prove a commercial receivable or an oral partnership commitment above the amount specified in the law in court solely through witnesses will run into legal obstacles. (HMK Art. 200: Legal transactions directed against any kind of claim tied to a deed and of a nature that will eliminate or reduce the effect and force of the deed cannot be proven by witnesses, even if they belong to an amount less than two thousand five hundred Turkish Liras.)
B. Concept of Commencement of Written Proof
The most important exception to the obligation of proof by deed is the “commencement of written proof”. If there is a written document, electronic record, or digital trace created by the opposing party pointing to the existence of the alleged obligation relationship, but not carrying the nature of a complete deed (conclusive evidence), this situation is accepted as the commencement of written proof. In the presence of the commencement of written proof, even if the limit of proof by deed is exceeded, the court may permit hearing witnesses for the completion and proof of the oral agreement.
5. Alternative Means of Proof and Evidence Management
In cases where a written main contract does not exist, the digital and actual footprints of the parties during the process gain great importance in order to reveal the content and existence of the oral agreement. Fundamental auxiliary evidence of a nature that can be evaluated by courts are as follows:
- Receipt Descriptions: Explanations entered during money transfers made through banks carry vital importance. For example, specific phrases written in the receipt description section such as “partnership share payment, profit share advance, debt payment, or rent amount” are accepted as strong commencements of written proof, and sometimes even conclusive evidence, showing the nature of the oral agreement.
- Digital Correspondence: Written digital communications such as WhatsApp, email, SMS conducted between the parties prior to or after the establishment of the contract constitute the nature of commencement of written proof if they contain agreement elements regarding the subject of the work. These records guide the trial as materialized forms of oral promises.
- Tacit Acceptance and De Facto Conduct: The parties engaging in actual conduct in accordance with the conditions of the oral agreement for a long period without any objection. To give an example, regular payment of a certain rate of profit share or salary every month and this situation being adopted by the parties forms quite a strong presumption regarding the existence of the oral agreement.
- Examination of Commercial Books: In commercial disputes, courts examine the commercial books and records of the parties to audit whether the orally alleged delivery of goods, performance of service, or payment items are reflected in accounting records. Properly kept commercial books play an active role in the proof process.
Legal Status of Voice Recordings
One of the methods frequently resorted to in proving oral agreements is taking voice recordings of conversations between the parties. In principle, voice recordings taken secretly without the consent and knowledge of the opposing party carry the nature of unlawful evidence, may violate the privacy of private life, and are not taken into consideration in proceedings. However, in exceptional and narrowly bounded situations such as the dispute being based on an instantly developing situation, not being a planned conspiracy, and there being ‘virtually no possibility of obtaining evidence by other means’ in order to protect the right suffered by the person, these recordings can a fortiori be evaluated by the court as a commencement of evidence. If you request to acquire more information regarding this matter, you can also consult our article titled “Legal Nature of Taking Voice Recordings”.
6. Procedural Procedures and Lawsuit Conditions in Oral Agreements
In lawsuits where the process will be initiated due to the breach of an oral contract, full compliance with procedural law rules is mandatory to prevent loss of rights. First, in disputes concerning the payment of a sum of money involving commercial receivables and compensation demands, filing a lawsuit directly is not possible, and completing the “mediation” process is a condition of lawsuit. During the mediation stage, parties can revise their oral agreements or unite through a method of agreement.
In case the dispute cannot be resolved, the lawsuit for receivables, compensation, or determination of non-indebtedness to be filed must clearly construct the “cause-and-effect relationship” between the demanded damages and the non-fulfillment of oral commitments with technical and legal justifications. Furthermore, receivable demands arising from oral contracts are subject to statutory “statute of limitations” periods; the legal process must be initiated before general limitation periods expire. Initiating an “execution proceeding without a judgment” directly for un-documented or oral receivables is also a practical procedural method; however, if the debtor objects to the order for payment, the proceeding stops, and the creditor needs to prove the existence of the debt in court to continue the stopped proceeding.
Conclusion
Pursuant to the principles of freedom of contract and freedom of form, oral contracts are legally valid and binding in cases where a special written or official requirement of form is not sought by law as mandatory. The difficulty of proving oral agreements with witnesses at the time of dispute necessitates the management of digital evidence, receipt descriptions, and elements that can form a commencement of written proof. Consequently, to prevent loss of rights, minimize contractual risks, and fully ensure legal certainty, making clear, understandable, and comprehensive written contracts at the beginning of relationships; and receiving legal support from a professional jurist during the dispute stage will be the most correct approach.
Some Precedent Decisions Upon the Matters We Have Discussed:
COURT OF CASSATION 1ST CIVIL CHAMBER, E. 2009/13940 K. 2010/1736 D. 22.02.2010
“The plaintiffs claimed that they made an oral contract regarding the sale of the 19-decare hazelnut orchard belonging to the defendant to M., one of the plaintiffs, for a price of 170,000.TL, … alleging that the contract was not fulfilled, requested determination that they are not indebted to the defendant, cancellation of the execution proceeding and promissory notes, collection of 20,000.-TL from the defendant, and deed cancellation and registration… It was decided by the Court to accept the lawsuit on the grounds that the allegation was fixed.”
- COURT OF CASSATION 6TH CIVIL CHAMBER, E. 2015/6368 K. 2015/6368 D. 27.10.2015
“Although the debtor … denied the underlying oral contract in the objection petition dated …, explicit declaration in the petition with transfer date … presented during litigation that … the lease relationship has continued until this time, … in the face of this, it must be accepted that the defendant accepted the lease relationship. In this case, while it was necessary for the Court to examine the merits of the matter and render a decision according to its result, deciding to reject the request with written justification is not correct.”
- COURT OF CASSATION 11TH CIVIL CHAMBER, E. 2024/6408 K. 2025/4336 D. 19.06.2025
“Since the conviction was reached that the decision of the … Regional Court of Justice regarding the acceptance of the main and joined … lawsuits and rejection on the merits by the … Regional Court of Justice on the grounds that … the 20% share price of the company agreed to be established in line with the oral contract between the parties was 500,000.00 TL and this price was paid bit by bit as 504,019.00 TL by … to …, the joint-stock company agreed to be established in line with the oral contract was not established and the requirements of the contract were not fulfilled, the price paid by … could be demanded from … in line with unjust enrichment provisions, … was in accordance with procedure and law, it became necessary to decide on the AFFIRMATION of the decision of the Regional Court of Justice.”