Simple Or Informal Contract Definition

In legal terms, a contract is an agreement between two or more parties to do, or not do, something in exchange for something of value. In contrast, an informal contract is an agreement that is not legally binding. An informal contract may be verbal or written, but it lacks the formality of a legal contract.

There are many situations in which an informal contract may be formed. For example, when two people make a bet on the outcome of a sporting event, they have entered into an informal contract. If one party fails to pay up, the other party can’t take them to court to enforce the bet. Another example of an informal contract is a simple handshake agreement between two friends to do something together, such as go on a vacation. Again, if one party doesn’t hold up their end of the bargain, the other party can’t sue them.

While informal contracts are not legally binding, they can still be enforceable in some cases. If both parties agree that the contract is binding and agree on what the terms are, then a court may find that the contract is enforceable even if it is not in writing. For example, if you verbally agree to buy someone’s car for $1,000 and then change your mind and try to back out of the deal, the other person may be able to take you to court and force you to go through with the sale.