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Is a verbal agreement legally binding
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Is a Verbal Agreement Legally Binding?

Will Cannon

Last updated on February 19, 2024

In the fast-paced day-to-day of business and personal relations, verbal agreements are standard. However, some questions may be about whether verbal agreements are legally binding.

Let’s dive into the ins and outs of verbal contracts and explore their legal standing, including specific examples and how they contrast with written agreements.

What is a Verbal Agreement?

A verbal agreement, often called a verbal contract or oral agreement, is a type of contract where two or more parties agree upon terms without written documentation. It’s a handshake deal where words and trust form the binding contract between the parties involved. 

For instance, a casual agreement between friends to lend money or a business committing to services over a phone call could constitute a verbal contract. While they may seem simple and convenient, oral agreements can often be challenging to prove, leading to misunderstandings or legal issues. Does that mean they hold no weight in the eyes of the law? Let’s delve into this next.

Is a Verbal Contract Legally Binding?

Verbal agreements can be considered enforceable by law, depending on the context and jurisdiction. They fulfill the essential elements of a contract, where one party offers and the other accepts. However, they can be challenging to enforce due to the lack of written evidence.

In many legal systems, most verbal contracts are valid unless they fall under the Statute of Frauds, a law that requires certain types of arrangements (like those dealing with real estate or lasting more than a year) to be in writing.

Even if an oral contract is considered valid, proving its existence or the agreed-upon terms can be difficult without written documentation or witness testimony. The absence of fresher evidence, such as text messages or emails confirming the agreement, may lead to complications in court.

While verbal contracts can be binding, they often lack the solidity and clarity that written agreements provide, making them a riskier choice in serious dealings.

What Makes a Verbal Agreement Legally Binding

The perplexing nature of verbal agreements often raises eyebrows, leaving people to wonder about the criteria that make these agreements legally binding. Understanding the facets of a legally binding verbal contract isn’t just for lawyers; it’s vital for anyone engaging in oral agreements. So, what exactly gives a verbal contract its legal footing? Let’s break it down:

  • Offer: One party proposes specific terms.
  • Acceptance: The other party agrees to those terms. A verbal contract’s validity starts with one party offering terms and the other accepting. Without a clear offer and acceptance, even an agreement with the best intentions may not be enforceable.
  • Serious Intent: Both parties must intend for the agreement to be legally binding. Verbal contracts can be casual, but for them to be binding, both sides must clearly intend to enter a legal contract. A casual promise might not qualify.
  • Value Exchange: Something of value must be exchanged between the parties. A contract requires exchanging something valuable, whether money, services, or goods. This “consideration” is essential for an agreement to be binding.
  • Clear Terms: The terms of the contract must be clear and understandable.
  • Possibility: The agreement must be something that can be performed.
  • Mental Capacity: Parties must be of sound mind.
  • Legal Age: Parties must be of legal contracting age. The contract may be invalid if one party is not of sound mind or legal age.
  • Legal Terms: The contract must not require illegal actions. If the contract includes actions against the law, it will be considered invalid.
  • Formal Requirements: Some contracts must be in writing (e.g., real estate). Certain types of agreements, like those covered under the statute of frauds, must be written to be enforceable.
  • Witnesses: Having witnesses can strengthen the validity.
  • Text Messages or Emails: Evidence of the agreement strengthens the case. While not strictly required, witnesses or written evidence like text messages can provide fresher evidence, bolstering the contract’s enforceability.

Ensuring a verbal contract meets all these criteria can be difficult without written documentation. A tool like Signaturely comes in handy here, offering solutions to legal document agreements, even if they began verbally. By understanding these aspects, you’re safeguarding your interests and honoring the essence of fair dealing and trust that forms the foundation of any agreement. Whether you’re entering a business deal or lending a hand to a friend, knowing what makes a verbal contract legally binding ensures that your agreement stands on firm legal ground.

When Are Verbal Contracts Not Binding?

The nuanced world of verbal contracts can be as intricate as fascinating. While oral agreements often hold legal merit, there are specific instances where they fail to meet the criteria for a binding contract. Here’s a look into the perplexing scenarios when a verbal contract might not be binding:

  1. Lack of Clear Terms: If the terms of the agreement are vague or ambiguous, a court may find the contract unenforceable. Specificity matters. 
  2. Statute of Frauds Violation: Certain agreements, such as those involving real estate, must be in writing to comply with the statute of frauds. Verbal contracts in these areas are not considered valid.
  3. Illegal Purpose: If the contract involves an illegal act, it’s automatically void. Legal integrity is crucial.
  4. Lack of Capacity: The agreement may be invalidated if one party lacks the mental capacity or is under the legal age to enter into a contract.
  5. Inconsistency with Written Agreements: The written document usually precedes if a written contract contradicts a verbal one.
  6. Impossibility to Perform: If the contract requires something impossible to perform, it can be deemed non-binding.

Navigating these pitfalls requires understanding contract law or seeking legal advice. One way to avoid such uncertainties is to have a written contract. Tools like Signaturely can help you draft written agreements, bridging the gap between casual conversation and legally binding commitment.

Verbal vs. Written Contracts: Which to Choose

The key debate between verbal and written contracts often boils down to proof and enforceability. Both are legally binding, but which should you choose?

Verbal contracts can be enticing because of their simplicity. They are easy to form and don’t require extensive documentation. However, they are often difficult to enforce due to the lack of concrete evidence. They may also lead to misunderstandings due to the absence of clearly defined terms.

Written contracts, on the other hand, leave little room for ambiguity. They spell out the terms clearly, making it easier to prove and enforce. Written agreements also provide fresher evidence in case of a dispute, offering more protection to all parties involved.

When in doubt, always lean towards written contracts. They provide a solid safety net and peace of mind in professional dealings. Written agreements offer an extra layer of assurance, ensuring all parties agree and understand the terms.

So, even though verbal contracts can be legally binding, the golden rule is: to get it in writing!

Create Legal Agreements with Signaturely

Entering into an agreement with a person or business can be tricky and confusing, especially for beginners. That’s why Signaturely is here to simplify your journey. The platform provides a seamless way to create legally binding agreements, complete with e-signatures. Forget the tedious paperwork; with Signaturely, you have access to a free contract template library suitable for various instances. Whether you need written agreements or electronic documentation, you’re covered.

Ready to transform your contract management? Try Signaturely for free and discover a new, efficient way to secure your agreements.

FAQs About Verbal Contracts

Below are a few of the most frequently asked questions about verbal contracts.

Can a verbal agreement stand up in court?

Yes, most verbal contracts can stand up in court. However, proving them can be more complex than with written agreements, especially without witness testimony or other evidence.

How can a verbal contract be enforced?

A verbal contract can be enforced like any other legally binding agreement. Still, it requires evidence such as witness testimony or proof of agreed-upon terms through text messages or other means.

What makes a verbal agreement invalid?

A verbal contract may be considered invalid if it lacks some aspects like offer and acceptance or mental capacity or falls under the statute of fraud requiring a written document.

Can someone break a verbal agreement?

Yes, like any other contract, a verbal contract can be broken. If one party fails to meet the terms, the other party may have legal remedies, though proving the breach can be more complex.

How long is a verbal agreement legally enforceable?

The statute of limitations on a verbal contract varies by jurisdiction and the contract’s nature. It is often shorter than written agreements, making it crucial to act swiftly if you wish to enforce the agreement.

What You Need to Remember About If a Verbal Agreement is Legally Binding

In the intricate world of agreements, understanding the dynamics of verbal and written agreements is paramount—oral contracts, while legally binding, often present challenges in proof and enforcement. Written agreements offer tangible evidence and are generally considered more secure. Utilizing platforms like Signaturely can further streamline the contract process, offering e-signatures and a vast library of contract templates. The key takeaway is the value of clear documentation, whether it’s a verbal or written agreement. When in doubt, putting pen to paper, or in this digital age, using an e-signature solution remains the best practice.

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