A contract defective only in the sense that it cannot be enforced by direct legal action. The contract is otherwise valid and subsisting, so a transferee of property gains a good title and any deposit paid may be retained. A contract of fidelity guarantee not in writing would be unenforceable (the Statute of Frauds).
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This is one, which lacks some evidential features. The contract is a valid one otherwise, but could not be enforced in a court of law.