Verbal Agreements – to be avoided….

Verbal agreements require the same criteria to be met as written agreements, namely:

- There must be an offer (for example, X offers to sell their shares to Y).

- Acceptance of that offer (Y agrees to buy the shares from X).

- Consideration (Y agrees to pay X money, or in some other form of payment, for the shares).

- An intention to create legal relations (both X and Y intended to sell and buy the shares, respectively).

Classic problems arise where one party denies entering into the verbal agreement with the other party. In such cases, the claiming party can still enforce the agreement if they can produce, in significant terms, one or more of the following evidence:

- Witness evidence. For example, a third party gives evidence that they heard the parties agree the transaction.

- Documentary evidence. For example, details of the agreement are referred to in emails, text messages, contemporaneous notes, invoices, order slips etc.

- The conduct of the parties. In other words, they acted in a way consistent with the agreement.

If there is poor or no evidence upon which to rely, then the court will have to take one party’s word over the other. This does not always mean that the court will arrive at the correct result.

It is clear, therefore, that to avoid uncertainty, possible litigation and, worse, losing out on an agreement that was relied upon, a written contract should always be drawn up between parties.

(Note that verbal agreements are not enforceable in certain situations, such as for the purchase and sale of land and certain types of settlement agreements.)