Settling verbal contract disputes

13th July 2022

Often, parties record their contractual agreements in a single document, or at least across several, from which the terms agreed can be identified. The difficulty arises when contracts that parties have entered into are verbal; despite these risks, whether through necessity, convenience or ignorance of the risks, these types of contract and issues still occur even today in business.

Verbal contracts can of course be as binding as those in writing, but the issues come when a dispute or litigation ensues. The core problem is proving what was agreed, as whether due to the passage of time or an unwillingness to admit the original terms, the parties’ recollections of the terms agreed often may well differ.

In the instance of a disputed verbal contract, the conduct of the parties after the agreement and any communications in relation to it will become key evidence, as will any independent witnesses to the agreement or third parties who become involved in carrying out the works/good or services being supplied under the contract.

Should you be in a position where a verbal contract is being considered, but is yet to be agreed, consider closely whether  a written contract can be utilised in its place. If it cannot be written before the agreement is made, then committing the terms to writing of what has been agreed afterwards and sending this to the other party is a viable alternative to  at least improve your position. Alternatively, if you require a verbal contract, it may be possible to agree this on a short-term basis with agreement to  enter into a written contract thereafter.

The above are initial tips of what to avoid and do with verbal contracts. The true lesson is that there are almost no situations where a verbal contract is preferrable to a written contract, parties may believe they are saving money using this method; however, should a dispute arise, the costs of litigation are likely to be far more than having a non-contentious solicitor draft the contract in the first place.

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