Are you wondering if verbal agreements are legally binding? If so, you should know that verbal contracts can be just as binding as written contracts, but they’re also often harder to prove the legalities of than written contracts.
Technology Makes A Mixed Bag of Contracts in Today’s Business World
In everyday business arrangements, discussions, and transactions, technology has enabled a plethora of communication portals. Emails, texts, messenger, online orders, and such exist to expedite things. There’s also the verbal conversations and written correspondence and orders to consider. To further complicate matters, it’s often the case that a contract may find itself partly verbal and partly written.
In any case, if a verbal agreement is part of the contract equation, then it must meet certain criteria to be considered legally binding.
What It Takes for A Verbal Contract to Be Legally Binding
1. Verbal Contracts Must Include an Offer and Acceptance
One person/entity makes an offer,and the other person/entity accepts said offer. This is the first step to creating any legally binding agreement, and it can look like any of the following examples:
• Offer and acceptance of employment under specified conditions.
• Offer and acceptance of the sale of a vehicle under a specified price.
• Offer and acceptance of a commercial lease agreement Victoria under certain terms.
• Offer and acceptance of lending monies, goods, or services under certain terms.
2. Verbal Contracts Must Include Complete Terms
In the above examples, you’ll notice “under certain terms” mentioned each time. This is because the terms of the verbal agreement must be specified and agreed upon for the contract to be complete. Otherwise, a court will consider a verbalcontract not agreed upon and therefore invalid and not binding.
In other words, you may have a verbal yes to lease a property, but it’s all but meaningless if that verbal agreement didn’t include terms like price and length of the lease.
3. Verbal Contracts Must Include A Binding Intention
While the intention is something that’s often difficult to legally analyze, both parties involved must have a reasonable expectation to be legally bound by the verbal agreement. Thisis generally exhibited by inference of intent. The transaction’s circumstances can be looked at for intent, such as:
• Have the parties began performing or utilizing the goods, services, space, or such outlined in the contract?
• Has something of value already been exchanged between the parties?
If yes, then most courts consider such actions as confirmation of intent to be legally bound.
4. Verbal Contracts Must Include Consideration
How often have you made verbal promises you’ve ultimately been unable to keep? Without consideration as a factor, the courts would be overflowing with such broken promises.
Consideration is the legal term for the exchange of value between parties. Do keep in mind that consideration is only binding following establishing an offer, acceptance, and intent. In other words, you can’t just randomly send someone a good or service and then demand payment.
For consideration, there’s a price paid by one party in exchange for the other party’s promise of delivery. This exchange doesn’t necessarily need to be monetary; it’s merely anything that symbolizes a commitment and intention of a binding agreement.
5. Verbal Contracts Must Abide bythe Standard of Legal Capacity
Legal capacity can vary from area to area. So, always know the legalities of where you’re operating. However, there’s a prerequisite that a person has the legal capacity to enter into a binding agreement. This includes they be:
• Of a certain age, which is usually 18-years-old.
• Of sound mental capacity and without mental impairment.
• Free of the influence of alcohol and drugs.
6. Verbal Contracts Require Proof of Agreement
Verbal contracts can be highly advantageous and convenient to business flow. Done correctly, they have the same legal power as any other contract. However, verbal agreements remain difficult to prove if problems arise.
Parties can default on agreements, dispute the terms, or even claim they never accepted the offer. It’s then brought to courts, which are often left to decide the case based solely upon the merits of one person’s word over another person’s word. You’re left to prove all the above criteria of a legally binding verbal agreement. Can you? The bigger question might be should you subject yourself to doing it.
The Benefits ofa Written Contract
Despite the initial ease of a verbal contract, you can see you’ve left with a serious potential problem and burden of proof afterward. Therefore, business and legal experts almost exclusively recommend business agreements go down on paper.
Of course, even written agreements can leave you open to misunderstandings and legal burdens if not drafted properly. Ensure that all written contracts are as detailed as possible in offerings, terms, conditions, and obligations. Don’t neglect dates and signatures.
What Should You Do If A Verbal Contract Is Your Best/Only Option?
In this case, you’ll want to make detail your best friend. Here are some tips:
• Keep a written log of all offer and negotiation details, including when, what, and with whom all discussions take place.
• Retain all forms of written communication that exchange hands.
• Take time to ensure the contract’s terms, conditions, and obligations are clear to both yourself and the other party.
• Agree that both parties are legally able and willing to enter into a binding agreement.
• Discuss each facet involved on a point-by-point system – good or service provided, price, payment criteria, length of the contract, termination of the contract, and so forth – and receive verbal confirmation of agreement and understanding.
In conclusion, a written contract will most universally offer you the most poignant protection because it remains hardest to argue with what’s in black and white. However, if a verbal contact is used, then help ensure its legally binding by taking the appropriate steps and tips outlined here.