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California Contract Basics

A valid California contract needs four things: parties capable of contracting, their mutual consent, a lawful object, and consideration (Civil Code §1550). Most contracts can be oral, but some — like real estate sales or agreements that can't be performed within a year — must be in writing under the statute of frauds.

By Find Local Law Editorial Team · Last reviewed: May 24, 2026

Researched and drafted with AI assistance and verified against primary sources (statutes, Judicial Council forms, and official court websites). This is general information, not legal advice.

A contract doesn’t have to be a long document full of legalese to be binding — but it does need a few essential ingredients.

The four essential elements (Civil Code §1550)

For a contract to exist in California, there must be:

  1. Parties capable of contracting (legal capacity).
  2. Their consent — which must be free, mutual, and communicated by each party to the other (§1565).
  3. A lawful object (you can’t enforce an illegal deal).
  4. Sufficient cause or consideration — each side gives something of value.

When a contract must be in writing

Many valid contracts are oral. But the statute of frauds (Civil Code §1624) requires a signed writing for certain agreements, including:

  • The sale of real property or an interest in it (and leases longer than a year).
  • An agreement that can’t be performed within one year.
  • A promise to answer for another person’s debt.
  • Hiring an agent or broker to buy or sell real estate.

How long you have to sue

If a contract is breached, the deadline to file suit (statute of limitations) is:

  • 4 years for a written contract (Code of Civil Procedure §337).
  • 2 years for an oral contract (§339).

That gap is one practical reason to get important deals in writing. When a contract is broken, see business & breach of contract disputes. For help drafting or reviewing an agreement, connect with a lawyer.

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Frequently asked questions

What are the elements of a valid contract in California?
Civil Code §1550 requires four: (1) parties capable of contracting, (2) their consent, (3) a lawful object, and (4) sufficient consideration. Consent must be free, mutual, and communicated by each party to the other (§1565).
Does a contract have to be in writing in California?
Not always. Many contracts can be oral. But the statute of frauds (Civil Code §1624) requires a writing for certain contracts — including the sale of real property or an interest in it, agreements that can't be performed within one year, and a promise to pay another person's debt.
Is an oral contract enforceable in California?
Yes, if it isn't one of the categories that must be in writing. But oral contracts are harder to prove and have a shorter deadline to sue — 2 years, versus 4 years for written contracts.
How long do I have to sue for breach of contract?
Four years for a written contract (Code of Civil Procedure §337) and two years for an oral contract (§339), generally measured from the breach.

Sources

Related guides

  • Business & Breach of Contract Disputes in California When a contract is broken in California, the non-breaching party can usually sue for money damages, and in some cases for specific performance. The deadline to sue is 4 years for a written contract and 2 years for an oral one (Code of Civil Procedure §337/§339).
  • Choosing a Business Entity in California California's common business structures — sole proprietorship, partnership, LLC, and corporation — differ mainly in personal liability and taxes. LLCs and corporations shield your personal assets but owe California's $800 minimum annual franchise tax; sole proprietorships and general partnerships avoid that tax but leave you personally liable for business debts.
  • How to Form a Corporation in California To form a California corporation you file Articles of Incorporation (Form ARTS-GS) with the Secretary of State for $100, file a Statement of Information (Form SI-550, $25) within 90 days and then annually, and pay the $800 minimum franchise tax — which is waived in the corporation's first year. An S corporation is a tax election, not a separate entity.
  • How to Form an LLC in California To form a California LLC you file Articles of Organization (Form LLC-1) with the Secretary of State for $70, designate an agent for service of process, file a Statement of Information (Form LLC-12, $20) within 90 days, and pay the $800 annual minimum franchise tax to the Franchise Tax Board.

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