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When are verbal agreements legally binding?


Though there are some exceptions (such as Settlement Agreements between employers and employees or agreements for the sale and purchase of land) verbal agreements can be legally binding as an oral contract. 

Verbal agreements are made by serious discussion between the parties whether the verbal exchange was in person, telephone or email (i.e an agreement in a social setting where the parties are under the influence of alcohol will not be readily found as an enforceable verbal agreement). For a verbal agreement to be legally binding there are certain elements which need to be satisfied. These are:

  • Offer and Acceptance: an offer is made which is accepted by another party; 
  • Consideration: there must be something of value exchanged for a promise (this does not always have to be money);
  • Intention: there must be an intention by the parties to make a legally binding agreement; and
  • Capacity: the parties must have legal capacity to enter into the contract

Enforcing a verbal agreement

A common dispute is for one party to renege on the verbal agreement and deny an agreement was reached. Though a verbal agreement, or an oral contract, is as legally binding as a written one there can be much difficulty in proving such an agreement due to the lack of written formality surrounding it. It is best practice to get the verbal agreement in writing such as sending an email to confirm any verbal agreement as proof if any dispute arises in the future. So, though it does have the same right as a physical agreement, unless a judge is satisfied that any evidence presented amounts to a complete and full agreement on the terms pertaining to the agreement, it is unlikely that the agreement will be enforced. A complete and full agreement is where all the terms and conditions have been agreed by all parties involved in relation to the service.

In order to prove a legally enforceable verbal agreement has actually taken place. Any correspondence or documentation such as: witness statements, any notes made at the time of the agreement, any proof of payment, or subsequent SMS or email transcripts may provide evidence of the existence of a verbal agreement and should be presented to the court. The judge will take a common-sense approach in the analysis of such evidence and the facts surrounding the case. Any agreements in principle will not be considered complete and would not be upheld in court.

In summary, a verbal agreement can be a legally binding contract but it must satisfy the four elements as described above. It is made by a discussion between the parties which is complete and with the terms agreed upon. A verbal agreement does have the same right as a written agreement, but proving the agreement is not without difficulty. To prove such as agreement satisfactory evidence such as those described above must be presented to the court, and the judge will take a common sense approach. 

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