[Updated 24/10/2024 by Natashia Blank]
“You’ve got a deal!”
Have you ever said these words and later found out you were being held to this verbal agreement? Or, are you waiting for someone to follow through on a conversation they seem to have forgotten? Verbal or oral agreements can lead to confusion, misunderstandings, or even disputes when expectations aren’t clearly laid out or remembered by both parties.
Today, we will look at what makes an oral contract legally enforceable and how to prove you had one in the first place.
What is an Oral Contract?
An oral contract or verbal contract is a spoken agreement between two or more parties that is legally enforceable. A verbal agreement may be made in a casual or professional environment and does not require written documentation.
Oral agreements can be legally binding even without writing as long as they meet the necessary elements of a properly formed contract.
Components of a legally enforceable verbal contract:
A presented offer
Consideration of the offer
Acceptance of the offer
Intention to create legal relations
Are Oral Contracts Legally Binding in Australia?
It depends. Verbal contracts are often difficult to prove and can lead to ‘he-said/she-said’ disputes. Courts are generally reluctant to recognise such agreements unless reliable evidence demonstrates relevant conversations took place and that all parties intended for those discussions to be legally binding.
It is also a requirement to establish a legally binding oral contract in which the precise terms agreed on can be identified. This typically requires credible testimony or supporting documentary evidence.
Recommendations for formalising a verbal contract
Whenever possible, agreements should be recorded in writing since the person trying to enforce a verbal contract is responsible for proving one exists.
If this is not possible, then it is good practice to keep a record of any ongoing performance of the oral contract. For example:
Collect evidence of payments made or received
Keep a timeline of events
Record key meetings, phone calls, etc in a diary
Retain evidence of terms agreed on such as quotes, receipts, invoices, bank statements, delivery dockets, purchase orders
How Are Verbal Agreements Proved?
The key feature of an enforceable verbal contract in Australia is whether there is sufficient evidence that both parties intended to be bound by the terms. The reliability of the witnesses and the language that is alleged to have been used is very important.
Evidence Required to Prove an Oral Contract
Examples of evidence required to prove an oral agreement include:
- Testimony from persons who were a party or witness to the conversations. This is provided in a statutory declaration or an affidavit attesting that they saw the agreement take place. They will need to include any terms of the agreement they can recall.
- Written evidence, such as text messages, emails or letters proving there was an agreement reached.
- Contemporaneous written records (ie: diary or notes) of the conversations or meetings with details of what was said, who was present, where and when the conversation/s took place.
- Evidence of the conduct of the parties following the alleged conversations which demonstrates a party’s reliance of the oral agreement.
Recommendations to Prevent an Oral Dispute
To prevent yourself from future verbal disputes, we recommend taking these 4 steps to formalise any agreement into a written contract.
Write the parties names;
Write the contract date (i.e. the date when the contract is signed by all parties);
The price or terms of the agreement, if any;
Have all of the parties sign the agreement
What Can I Do if a Verbal Agreement Was Broken?
The first step is to engage a litigation solicitor to understand and protect your rights.
You may be surprised by what contracts are considered legally enforceable. For example, a thumbs up emoji.
If you have any questions, please get in touch with the Litigation team at Greenhalgh Pickard for specialised advice.
If in doubt, get it in writing!
Greenhalgh Pickard’s litigation lawyers
