Affiliate Broker Tennessee (TN PSI) National Practice Exam `

In which situation would an oral agreement become enforceable?

1. If there are witnesses present

2. When it involves a written contract later

3. If both parties act in accordance as agreed

4. Oral agreements cannot be enforceable

The correct answer is: If both parties act in accordance as agreed

An oral agreement can become enforceable when both parties act in accordance with what has been agreed upon. This is often referred to as performance of the contract, meaning that one or both parties have taken steps to fulfill their obligations as outlined in the oral agreement. When the agreed-upon actions are executed, it demonstrates mutual consent and intention to be bound by the terms of the agreement, making it enforceable in a legal context. The presence of witnesses to an oral agreement might provide some level of support for claims regarding the terms discussed, but it does not inherently make the agreement itself enforceable. Similarly, while an oral agreement may later be incorporated into a written contract, the validity of the oral agreement does not depend on that written documentation and typically does not affect its enforceability as long as performance has occurred. The notion that oral agreements cannot be enforceable is inaccurate; many oral agreements, particularly those simpler in nature, can indeed be enforceable under the right circumstances, especially if backed by performance or actions taken by the parties involved.