Are Verbal Contracts Legally Binding? A Guide to Understanding Oral Agreements

Verbal contracts, also known as oral agreements, can be a convenient way to conduct business. However, they can also be a recipe for disaster if not properly executed. In this article, we'll explore the legality of verbal contracts and provide guidance on how to ensure your oral agreements are legally binding.

What is a Verbal Contract?

A verbal contract is an agreement between two or more parties that is made without a written document. It can be a simple agreement, such as a promise to pay a debt, or a complex agreement, such as a partnership or employment contract. Verbal contracts can be made over the phone, in person, or even through email or text message.

Are Verbal Contracts Legally Binding?

The short answer is: it depends. In general, verbal contracts are not legally binding unless they are supported by some form of consideration, such as a promise to pay a debt or a promise to perform a service. However, there are some exceptions to this rule.

Exceptions to the Rule

There are several situations where a verbal contract may be legally binding, even without consideration. These include:

• Contracts made in writing: If a verbal contract is later reduced to writing, it may be considered a legally binding contract.
• Contracts made in the presence of a witness: If a verbal contract is made in the presence of a witness who can testify to the agreement, it may be considered a legally binding contract.
• Contracts made under duress: If a verbal contract is made under duress, such as threats or coercion, it may be considered a legally binding contract.
• Contracts made with a third party: If a verbal contract is made with a third party, such as a supplier or contractor, it may be considered a legally binding contract.

How to Ensure Your Verbal Contract is Legally Binding

If you want to ensure that your verbal contract is legally binding, there are several steps you can take:

• Get it in writing: As soon as possible, reduce your verbal contract to writing and have both parties sign it.
• Include consideration: Make sure that the contract includes some form of consideration, such as a promise to pay a debt or a promise to perform a service.
• Have a witness: Have a witness present when the contract is made, and have them sign a statement attesting to the agreement.
• Keep records: Keep records of the contract, including any correspondence or communications between the parties.

Conclusion

Verbal contracts can be a convenient way to conduct business, but they can also be a recipe for disaster if not properly executed. By understanding the legality of verbal contracts and taking steps to ensure they are legally binding, you can protect yourself and your business from potential disputes.