Verbal Agreements in Business

Definition and Characteristics

• A verbal agreement is an agreement or understanding made between two or more parties through spoken words, without a written contract.
• Verbal agreements are often informal and based on trust, but they can still be legally binding.
• The key elements of a verbal agreement are:
  • Offer and acceptance
  • Consideration (something of value exchanged)
  • Intention to create a legal relationship

Advantages

• Verbal agreements can be quick and easy to make
• They can be flexible and adaptable to changing circumstances
• They can promote a sense of trust and cooperation between parties

Disadvantages

• Verbal agreements can be difficult to prove or enforce in court
• They can be misunderstood or misinterpreted
• They may not be suitable for complex or high-stakes agreements

Enforceability

• Verbal agreements can be legally binding, but they can be challenging to prove in court
• To prove a verbal agreement, parties must provide evidence of the agreement, such as:
  • Witness testimony
  • Records of conversations or meetings
  • Actions taken in reliance on the agreement
• Verbal agreements may be subject to the statute of frauds, which requires certain agreements to be in writing to be enforceable

Best Practices

• Use clear and specific language to avoid misunderstandings
• Ensure all parties understand the terms of the agreement
• Consider putting the agreement in writing to avoid disputes
• Keep records of conversations and meetings to provide evidence of the agreement