Verbal agreements seem like the sort of story plot points Hollywood would falsely convince us have validity in court. However, verbal agreements between parties are, in fact, a valid recognition of a contract.

The question isn’t if verbal agreements are legally binding but how “easy” are they to enforce? 

First, we must decipher if you have a verbal agreement in place.

What constitutes a verbal agreement?

To know if a verbal agreement is in place, there are four key factors that must be present:

• An offer
• An acceptance of this offer
• An exchange of value
• An intention to create legal relations

Despite the agreement itself being “verbal” which essentially means it was made through conversation, the best way to be sure one is in place is through written correspondence.

What proves the existence of a verbal agreement?

Even if you know that an agreement was made verbally, you will still need evidence to enforce the contract. I have already explained that written correspondence acts as proof – this includes emails, text messages and letters that refer to the details of the agreement – but you should also look for:

• Performance based evidence such as bank statements proving that payments have been exchanged or invoices/delivery notices.

• Witness accounts beside your own that are able to corroborate how, when and where the agreement was made as well as the terms of it.

What are the risks of a verbal agreement? 

If you are wondering whether a verbal or written contract is best then it is important you understand the risks of verbal agreements.

• The other party could deny that a verbal agreement ever took place and if you do not have sufficient enough evidence to refute this then it will be very hard to prove the existence of the agreement.

• Verbal agreements are rarely ever as precise as written agreements. Therefore clearly defining terms and collecting evidence with specific details can be complex.

• We do not always interrupt conversations the same way as the person we are conversing with – this is the same for verbal agreements. While you and the other party involved may agree to certain terms, your understanding of those terms could be very different from one another.

Should you rely on verbal agreements?

While verbal agreements are legally binding, it is always better to have a written record of any agreement you make. Should you ever find yourself in a situation where you need to enforce the agreement – such as a dispute – you need to have a clear understanding of the rights and responsibilities being challenged.

There is always the risk that a verbal agreement will complicate what could be a fairly straightforward matter.

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