I give you my word… said the conman to the boy.
One thing we’ve come to realise amongst all the weird and wonderful cases we’ve encountered, is that the value of a person’s word has lost a lot of the weight it used to hold. Before paper and ink, typewriters, word processors, laptops, and computers, a person’s word was a verbal contract and, therefore, unthinkable to break.
Contracts form an inimicable part of our lives. Every day, we’re bombarded by little boxes to tick, things to opt in and out of and dotted lines to sign. From buying scratch cards, to selling a car, to buying your holiday flights, every transaction is governed by a contract, verbal or not.
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 borne 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.
The first rule of verbal contracts is: you always follow up with a written contract.
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 simply because a clause is excluded from a contract, it ceases to be relevant, or to even exist at all. 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 the written contract being produced.
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 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.
What makes a verbal or written contract legally valid?
For most contracts to be valid they must satisfy four elements:
- There must be an offer made (the offer element)
- The offer must be accepted (the acceptance element)
- There must be some form of consideration, usually money from one party and goods or services from the other (the consideration element)
- The parties must intend to create a legally binding agreement (the intention element)
If a contract doesn’t meet these 4 criteria, it’s possible that one side will argue that there wasn’t a contract agreed in the first place.
Verbal contracts vs written contracts
In terms of validity, verbal contracts are just as valid as written ones. The big differences arise from proving what the contents of a verbal contract are. Written contracts are plain for all to see; the terms are clear and unequivocal, which is why they are preferred.
Verbal contracts rely on reference and memory, often leading to ‘he said-she said’ scenarios in disputes. The two most common ways that verbal contracts are proved are by either evidencing any correspondence referring to the terms and conditions of the verbal contract, or by showing that there was action taken upon the agreement taking effect.
For example, if, following the initial agreement between Friend A and Friend B, Friend B sends a text message to Friend A along the lines of:
“Ok, that’s fine. Don’t worry about payment, this one’s on me.”
There’s strong evidence to suggest that there was no payment expected for the provision of Friend B’s services, and therefore it would be difficult for Friend B to prove otherwise. So while it might be difficult to deduce the exact contents of what was included within the verbal contract, the main elements can sometimes be pieced together through detective work and written references to the agreement.
And if there was no such convenient text message? Well, if Friend B produced a schedule of works or a work order for Friend A, it could be argued that this action in itself signified the presence of an agreement. But it should be noted that this wouldn’t prove what the contents of the verbal contract were, just that there could have been an agreement.
To prove the contents of the agreement, you would likely need to refer back to evidence shown in written correspondence.
It’s important to note that there are some agreements that cannot be made verbally. Agreements involving property or guarantees are required by law to be in writing to be relied upon.
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.
Why choose our specialist contract agreement solicitors in brighton?
Understanding the contents of contracts is vital as you are binding yourself to the specific terms and conditions. Therefore, it’s vital that you fully understand exactly what you are agreeing to and that the contract is fair. Our highly qualified contract agreement solicitors in Brighton are here to help you today. Please get in touch with our solicitors through our contact us page or call us directly on 01273 726951.