A verbal contract can be legally binding, as long as it includes the same key elements as a written contract. These include:
- Offer: one party must make a clear and definite proposal to another party. The offer should include specific terms: what’s being agreed upon, the price, delivery terms, etc.
- Acceptance: the other party must accept the offer and let the offering party know of their acceptance.
- Consideration: Both parties must exchange something of value (e.g. goods, services, or money), or refrain from doing something. This ensures this is a contract, not just a gift.
- Intention to create legal relations: Both parties must intend for the agreement to be legally binding and enforceable.
Some contracts must be in writing (e.g. property sales or some consumer contracts). And in certain cases, contracts need to be signed or witnessed to be valid.
The biggest downside with a verbal contract is lack of evidence – if there is a disagreement at any stage and you require proof of contract, you have nothing substantial to fall back on. A contract documents the details of the offer and the signatures prove acceptance. A contract lists the consideration and overall acts as the intention to create a legal relationship.
Contracts act as a written record, and because they accurately and efficiently cover the four key elements they have become commonplace in all aspects of business.
If you do get into a disagreement and only have a verbal agreement, you will need to rely on the following:
- Witnesses
- Correspondence, communication and written notes
- Performance of the agreement
- Inconsistencies or actions of the other party
- Reputation in the industry
A verbal agreement can be valid, but proving it is more difficult. If there is a disagreement between two parties, the first thing an aggrieved party can do is to dig out the contract. If there isn’t one then they will need to create a case, compiling notes, witness statements, an audit trail of communications, etc.
The bottom line: it will be cheaper and quicker to create a contract ahead of any business relationship. Each party can then check what they have agreed periodically to make sure the agreement is on track. Relying on people’s memories, often months or years after the agreement was made, is a risky strategy.
At AWB Charlesworth Solicitors we have extensive experience in business law, for large businesses as well as start-ups. If you need legal advice at any stage, contact Umberto Vietri on 01274 352056 or email umberto.vietri@awbclaw.co.uk.
21 March 2025
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