Is a Verbal Contract Legally Valid?

Verbal contracts may be an option when your business operations are fast-paced and need to stay on the move at all times. Even so, there are times when written contracts or proof is needed to prevent a breach of contract. Whether you’re considering creating verbal agreements or have already begun making them, this guide explores the complexities and legal implications of verbal contracts in business dealings and how you can prove them.

What Is a Verbal Contract?

A verbal contract is any agreement two or more people make in person, over the phone or any way that is spoken rather than written down. Verbal contracts may have elements that make it binding, including:

• Offer and acceptance
• Intention
• Consideration
• Capacity
• Legality

While both oral and written agreements are valid types of contracts, a written agreement is generally easier to prove because there is clear evidence of a contract. It also leads to fewer disputes because terms are clearly outlined in a written contract. Still, oral contracts offer advantages such as less time and money spent on writing up a contract.

When Are Verbal Contracts Used in Business?

Verbal contracts are best used for business transactions and situations with less complex terms and little risk of leading to a need for legal action. Most of the time, oral agreements might be suitable for fast-moving businesses in the hospitality and retail industries. These businesses need to make quick decisions to keep operations moving smoothly, so verbal contracts are more convenient compared to written agreements that may slow down the process.

Other times, some industries may have particular laws and regulations guiding their use of verbal and written agreements. Still, verbal contracts might lead to legal issues at a later stage given the difficulty of proven the precise contractual terms.

Legal Framework Governing Verbal Contracts

The Massachusetts Statute of Frauds and its rules regarding contract law require some agreements to be made in writing. The state put the Statute of Frauds in place to prevent people from fabricating oral agreements that protect important rights and assets. Some contracts that must be in writing for enforceability include:

• Consideration of marriage
• Payment of another person’s debt
• Payments from an individual’s estate
• Property sales or interest in real property
• Agreements that will not be performed within one year

Are Verbal Contracts Binding in Court?

Whether your verbal contract is binding in court will depend on various factors. Some aspects a court will look at to determine if it is a binding contract include whether:

• A detrimental reliance occurred
• An actual offer was made and accepted
• There were realistic expectations of the offer and acceptance
• There is any history of dealings between the parties

What Makes a Verbal Contract Legally Binding?

A legally binding verbal contract often relies on three factors — offer, consideration and acceptance. For example, you may have received an offer of a certain price for a product or service you’re selling. You considered the terms and conditions together and accepted the deal. Following this, you and the other party performed your obligations based on the contract’s terms. This indicates to the court that it may be legally valid, especially if one party relied on the promises of the contract and it lasts over one year.

To counter the breach of contract, it’s best to write everything about the situation and contract down on paper, preferably as soon as the contract comes into effect.

The Risks of Relying on Oral Agreements in Commercial Transactions

When you’re making a quick agreement on a matter that’s excluded from the Statute of Frauds, you might find it much more convenient to move forward without a written contract. However, potential risks may arise if there is miscommunication.

1. Lack of Evidence

Verbal agreements often lack evidence, such as written documents and other paper trails. This makes it challenging for someone to prove the agreement and its specific terms existed. For this reason, if legal action occurs, the testimony of witnesses in court proceedings is often the only evidence available.

2. Memory and Credibility Issues

Oral agreements can sometimes lead to disagreements when memory starts to fade or gets distorted. One person might find it challenging to recollect the details, and they may even interpret the terms of the contract differently. In these cases, it’s difficult to prove the credibility of the oral contract and what was originally said. This makes it a good idea to follow up with an email or written contract with specific details to avoid credibility issues.

3. Potential Misunderstandings and Disputes

With oral agreements, it’s easy to misinterpret aspects of a deal and forget to mention important details. This is another issue that can lead to miscommunication and conflict. Having a precise written copy outlining everything may be a great way to mitigate this issue.

4. Ambiguities of Terms and Overall Intent

People might misinterpret certain words and phrases you use when discussing a contract because the meaning is ambiguous or unclear. For this reason, it’s essential to avoid vague descriptions and be more specific. If your agreement involves various complex conditions, it might be best to use a written contract to relay information clearly and accurately.

How to Prove a Verbal Contract: Evidence and Testimony in Court

One of the best ways to present a strong case is by documenting everything. Record the time, date, and details of the oral contract as accurately as possible. Also, write down who the witnesses were and whether you missed out on any business opportunities due to this agreement. You’ll also want to define all terms and conditions clearly while using simple language and record the conversation as proof.

Safeguarding Your Business Interests With Calabrese Law Associates

When making any business contract, it may affect your work operations and personal aspects of your life when someone breaches it. That’s why Calabrese Law Associates works with various business and contract law matters for construction and real estate businesses. Our attorneys are dedicated to offering legal advice and assistance on binding contacts.

If you believe someone has breached a verbal agreement to which you were a party, reach out. Our professionals offer expert advice on your next steps. In the meantime, it’s best to collect any written evidence and other proof of its existence, including messages and emails sent to inform them of their breach of contract.

Seek Professional Legal Support on Verbal Contracts From Calabrese Law Associates

If you want to protect the terms of your verbal agreement, it’s important to understand what makes it legally valid to help you gather the correct evidence. Verbal contracts often require more critical thinking for a strong testimony in court. Whether you have a verbal real estate or construction contract, our lawyers at Calabrese Law Associates may assist with your unique situation. For expert legal support, contact a knowledgeable attorney at Calabrese Law Associates in the Greater Boston Area today.

This publication and its contents are not to be construed as legal advice nor a recommendation to you as to how to proceed. Please consult with a local licensed attorney directly before taking any action that could have legal consequences. This publication and its content do not create an attorney-client relationship and are being provided for general informational purposes only.

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