Is a Verbal Contract Legally Binding?
By Tom Odlin, published: 2023-08-24
Most of our communications happen digitally, from text messages to emails, so it’s easy to forget the weight and potential legal implications of the spoken word (and of the emoji after a recent Canadian case determined that a thumbs up in a text message is legally binding!).
A burning question arises in business and personal settings: “Is a verbal agreement or contract legally binding?” The answer might surprise you.
The basics of verbal contracts
A verbal contract, like written legal contracts, is an agreement between parties to exchange goods, services, or promises.
Just because it isn’t on paper doesn’t necessarily mean it lacks legal force. In many jurisdictions around the world, verbal contracts can be legally binding.
However, for a verbal contract to be binding, it must still satisfy the basic contractual elements:
- Offer: One party proposes a deal or arrangement.
- Acceptance: The other party agrees to the offer.
- Consideration: Something of value (like money, services, or goods) is exchanged by the parties.
- Mutual Intent: Both parties genuinely intend for the agreement to be binding.
- Capacity: Both parties are of sound mind, legal age, and free from duress.
A real-life example of a verbal contract
Sarah is an independent web designer and meets with John, a restaurant owner.
John says, “If you can redesign my site and have it live in two weeks, I’ll pay you £2,000.” Sarah replies, “Deal.” They shake hands on it.
This verbal exchange forms a contract. Sarah promises her services in exchange for John’s promise to pay £2,000. If either party fails to uphold their end of the bargain, they could be liable for breach of contract.
Is a verbal contract legally binding?
While they can be legally enforceable, verbal contracts come with a unique set of challenges:
- Proof: Without written evidence, proving a verbal contract’s existence or its terms’ specifics can be difficult.
- Misunderstandings: Verbal communication is prone to misinterpretation. Different recollections of terms and conditions can lead to disputes.
- Memory: Over time, our memories of conversations can fade or change, which can make it hard to recall exact terms or conditions if disputes arise in the future.
When are verbal contracts not legally binding?
Although verbal contracts can be binding, there are certain situations where a written agreement is necessary:
- Land or Real Estate Transactions: In many jurisdictions, agreements related to real estate must be in writing to be enforceable.
- Long-Term Agreements: Contracts that span over a specified length of time (often more than a year) typically need to be written.
- High-Value Transactions: Some high-value transactions, like those exceeding a certain monetary threshold, may require a written agreement.
- Consumer Credit Agreements: Agreements related to loans, credit, or financing might be subject to specific statutes mandating written contracts.
It’s essential to familiarise yourself with local laws and regulations, as the exceptions can vary from one jurisdiction to another.
Best practices with verbal contracts
Given the potential pitfalls associated with verbal contracts, it’s wise to adopt some best practices:
- Opt for Written Contracts: Whenever possible, put your agreements in writing. This eliminates ambiguity and provides a clear reference in case of disputes.
- Confirm Verbally Agreed-Upon Terms: If you make a verbal agreement, follow up with an email or written summary of the conversation to create some record of the agreement.
- Seek Legal Advice: If you need clarification on the enforceability of an agreement, consult with legal professionals, like those at Zegal, to guide you through the complexities.
How Zegal can assist with contracts
Navigating the intricate world of contracts can often be daunting, but it doesn’t have to be.
This is where Zegal steps in, ensuring you’re always on the right side of the law.
- Drafting and Reviewing: Zegal’s legal experts specialise in drafting clear, concise, and legally robust contracts tailored to your needs. Whether you’re entering into a partnership, hiring new employees, or embarking on a new business venture, having a professionally crafted agreement is invaluable.
- Digital Contract Management: Managing contracts effectively means leveraging technology. Zegal’s platform offers a centralised location for all your contracts, ensuring they’re easily accessible, trackable, and secure.
- Education and Resources: Beyond the basics, Zegal believes in empowering its clients with knowledge. The platform offers a wealth of resources, from articles to webinars, to deepen your understanding of contractual nuances and stay updated on any legal changes.
- Dispute Resolution: If you ever find yourself in a situation where a contract is breached, or a dispute over payment arises, Zegal’s templates are on hand to guide you.
- Scalability: As your business grows and evolves, so do your contractual needs. Zegal grows with you, providing solutions that adapt and respond to the changing landscape of your enterprise.
What is Zegal?
Dan wants to tell you himself.
In conclusion: Best to get a written contract
While verbal contracts may have their place, the undeniable value of clear, written agreements cannot be overstated.
Zegal’s mission is to demystify the legal process, ensuring that businesses and individuals can operate confidently and securely. Whether you’re a seasoned professional or just starting out, Zegal is the partner you need to ensure all your contractual bases are covered.