This is the 4372nd most frequent Japanese word.
口頭
Oral; verbal.
In this sentence, '口頭' (こうとう, koutou) is used as an adjective meaning 'oral' or 'spoken', describing the mode of conveying information, as opposed to written communication.
彼は口頭でその事実を述べた。
He stated the fact orally.
Here, '口頭' is used as a prefix to describe the examination ('試問', shimmon) as being conducted verbally.
私たちの試験は口頭試問です。
Our examination is an oral test.
In this instance, '口頭' specifies that the confirmation of the contract details was done through spoken communication rather than in writing.