Verbal contracts are a common occurrence for the self-employed, with deals often being settled over the phone or with a handshake over a cup of coffee. However, verbal contracts can prove problematic when agreements fall through or when there are misunderstandings. This can leads to disputes which may be damaging to your reputation and that of your business, and it may even lead to litigation.

It is therefore essential that your verbal contracts are enforceable in court, should you need to make a claim or defend your position with respect to any oral agreement.

What constitutes a verbal contract?

As with written agreements, a verbal contract requires an offer, an acceptance of that offer, and consideration (i.e., a bargained-for exchange). Once a complete verbal agreement has been made between two “competent” parties, the contract is just as legally binding as a written contract and claims can be made against a breaching party.

Where can verbal contracts apply?

According to UK law, verbal contracts are binding where two or more parties agree on services to be performed and on remuneration for said services. However, verbal contracts do not apply to certain types of agreements which require detailed and specific terms. For example, written contracts are necessary for property purchase or tenancy agreements, consumer credit contracts, and the transfer or licensing of intellectual property rights. Any contracts including a guarantee must also be prepared in writing in order to be valid and legally binding.

Enforcing a verbal contract

Firstly, in order to be legally binding and upheld in court, verbal contracts must be complete. In other words, the parties must have determined and agreed to all of the terms and conditions with respect to the services offered and remuneration.

Should any dispute arise, a solicitor should always be consulted to offer alternative solutions before seeking legal recourse. Sending letters and emails pressing the defaulting party to uphold their end of the agreement is an important first step and will also provide a paper trail.

If it does become necessary to litigate, the main hurdle to overcome is putting together sufficient evidence to support your claim. In the event that you cannot source credible witnesses to testify to the verbal agreement, the best recourse is to rely on the breaching party’s actions to support your claim; for example, if a large shipment was made, this can be used as proof of the verbal contract. Any documentation or proof of actions stemming from the agreement should also be presented as evidence.

Where there may still be confusion as to the terms of the verbal agreement, the court may imply terms based on the actions of the contracting parties and on the factual circumstances of the agreement, referred to as “terms in fact”.

Protecting yourself from breach or liability

Generally speaking, it can be challenging to uphold a verbal contract in court because of the lack of written proof. It is therefore strongly recommended that verbal contracts be immediately set in writing to unequivocally outline the express terms of the agreement, thus minimising the risk of misunderstandings or disputes.

For expert legal advice on verbal contracts, contact us at The London Law Practice today.

 

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