What are verbal agreements?
A contract is an agreement entered by two or more persons with the intention of being legally bound. Verbal agreements are agreements made between persons based on spoken words. In order to be legally binding, a verbal agreement must have all the necessary features of a contract, including:
- Valid offer and acceptance of the terms of contract
- Intention to create a legally binding contract
- Valid consideration
- Legal capacity of the parties to enter the contract
- Certainty and completeness of the terms of contract
Are verbal agreements legally enforceable?
Proving the terms and enforceability of verbal agreements is often difficult due to the fact that, by their very nature, verbal agreements are not set out in writing. If the existence of a verbal agreement is proved, and all of the elements of a valid contract are present, then a verbal agreement may be enforceable. However, the lack of tangible evidence available to prove the existence of an agreement can often result in challenges regarding the terms of the agreement and the intentions of the parties.
The intention of the parties to be legally bound is one of the most important matters to consider in determining enforceability. Generally, the Court will take into account the entire contextual circumstances of the agreement in determining whether an ordinary person, in the position of the parties to the agreement, would have intended to be legally bound.
Difficulties with verbal agreements
Difficulties in proving the existence of a verbal agreement may arise where either of the parties are untruthful about the terms of the agreement or where they have differing recollections of the event. However, the existence and terms of an agreement may be proved through conduct, such as services completed by one party or transfers of money, or by the presence of any witnesses at the time of the agreement.
Wherever possible, agreements in writing are always preferable. When verbal agreements are entered into, the parties should confirm the agreement in writing or otherwise keep detailed notes of the relevant conversations.
It is always advisable to seek legal advice on contracts and their enforceability as there are various legal issues that may arise.