• Verbal vs written contracts?
• Other issues?

What is a verbal contract?

While the spoken word is being used less and less to form contracts, even in today’s modern society, most business transactions will be born out of a conversation and followed up by written agreements. This is done so each side has a written account of what they are giving and what they are receiving. What might have begun as a verbal contract evolves and transforms into a formal written contract, often with little to no great significance.

But these conversations aren’t insignificant. In fact, they can make or break a deal or be the difference between a successful or unsuccessful claim.
Many people think that if a clause is excluded from a contract, it ceases to be relevant or to even exist. This is absolutely not the case. The confusion often arises from people’s belief that it can be nigh on impossible to prove that there was any verbal contract or agreement prior to producing the written contract.

How do verbal contracts arise?

One of the most common examples of verbal contracts gone wrong is when friends who own separate businesses do favours for one another. For example, Friend A calls Friend B and requests their services for free or to pay ‘mates rates’ and Friend B fulfils the request without hesitation. Then arguments happen. They both fall out, and Friend B wants fair payment for the services rendered. But there wasn’t a contract in place. Only a conversation that happened once upon a time when falling out was never a concern.

This is where the confusion begins.

What normally then happens is that Friend A will argue that Friend B agreed to offer services for free verbally. Then Friend B will deny it was for free, but that there was a verbal contract in place for payment for services.
And so on, and so forth.

Got an issue with a pre-existing verbal or written contract? Head to our contract dispute page.

What other issues exist with verbal contracts?

The devil is in the detail, and never has this been more true than with verbal contracts. Often there is little doubt that a verbal contract existed. Instead, the issue lies with what the exact contents of that contract were.
Let’s say you verbally agreed a lease with your landlord and now you want to move out. How much notice do you need to give? Is it one week? Is it 4? Are you even allowed to break your lease?

It could be that you both verbally agreed to a notice period but one or both of you have forgotten exactly what was said.

Remember that, however right you may think you are, or however good your memory may be, the judges don’t have a magical ability to know you’re telling the truth. Instead, they have to be presented with evidence from both sides and, ultimately, decide which evidence they prefer. This normally boils down to whose story is more likely to be true. And this is even more important in the absence of a written contract.

You may have the best memory in the world, but if your side of the story goes against all logic and common sense, you could find yourself with a judgment against you. This is why verbal contracts come with an innate amount of risk.

To reduce your risk, you need to record the terms of the agreement in writing. This will avoid problems and disputes in future and give both parties certainty.
There may also be other considerations that need to be addressed when entering into a contract. For advice and drafting of written agreements, please call us on 020 3007 5500 or contact us.