How to resolve a dispute arising from a verbal agreement
Verbal agreements between two parties can emerge for a variety of reasons. Sometimes, you might have to agree a deal with a new supplier or customer very quickly, and forgo the usual process of properly documenting the contract. Other times, a verbal agreement might be struck over changes to a contract, or form part of an informal discussion where a written contract doesn’t feel appropriate.
We often see cases where there is no written agreement. That could be for a loan, or provision of goods and / or services. It is always much harder to prove a case where there is little or nothing in writing to evidence the contract, but it does not mean that the case cannot be proved, says Simon Steele-Williams, Dispute Resolution Partner at Parfitt Cresswell Solicitors Uckfield office.
That said, we always advise our clients to make sure that they evidence any contract in writing, which will provide much more certainty, and less likelihood of there being any dispute arising that could involve litigation and substantial legal costs. In this article, Simon Steele-Williams explores the requirements for anyone looking to resolve a dispute which arises under a verbal agreement.
Are verbal agreements legally binding in the UK?
Yes, verbal contracts are legally binding in the UK. However, sufficient evidence is required to prove that they meet the same conditions for enforcing a written contract.
What constitutes a valid verbal agreement?
A verbal contract is the same as a written contract in that there must be:
- An offer being made;
- The offer being accepted;
- Consideration made of that offer (i.e. detailing an exchange of value);
- The intention to make the agreement legally binding.
The difficulty with a verbal agreement is in proving that these conditions were met. If sufficient proof can be provided, a verbal agreement can be enforced like any other.
What are the pitfalls of a verbal agreement?
While a verbal contract is legal in the UK, without a conversation being recorded or extensively documented, it is generally much harder to provide evidence of the precise terms of a verbal contract than a written one.
The lack of formality around most verbal contracts also means that the conditions of a valid verbal contract are not always met. If a verbal contract does not demonstrate agreement on all of the required terms, it will be much more difficult to determine exactly what has been agreed to, and what both parties’ obligations are.
Say for instance that you agree a verbal contract to supply your product to another business. While you might have discussed a price for the goods and the quantity they intend to purchase, you might have completely neglected to discuss aspects such as the warranty period for the goods, what actions you will need to take if you are unable to deliver them on time, or what the interest would be on late payments.
All of these are circumstances in which the contract could be disputed; whilst there may be some implied terms in law, failure to agree terms will almost certainly lead to them not being included, and the use of alternative dispute resolution or court proceedings may be required to resolve the problem. Any one of these issues can be difficult to resolve when something goes wrong if there is no written record, or if they have not even been considered.
What action can you take if you have a dispute following a verbal agreement?
While verbal agreements can be difficult to prove, it isn’t impossible. There are a variety of options available to resolve a dispute over a verbal contractual agreement, and achieve a positive outcome.
The first port of call will be to negotiate with the other party. It may be that you can reach an agreement that benefits both parties, and salvages your working relationship. This would be a good opportunity to put a deal in writing, and avoid any further misunderstandings.
If this is unsuccessful, however, there are other options available to you. One would be to enter ‘alternative dispute resolution’ (ADR). This is a process of arbitration or mediation, involving an independent third party working with you both to resolve the issue, or failing that, to adjudicate on the dispute.
If none of these options work, then your only choice may be to issue a claim in court for breach of contract. A judge will then review all of the available evidence and make a ruling on how to best resolve the dispute, including potential damages based on lost trade or other expenses incurred.
What evidence will help prove or refute a verbal agreement?
There will need to be consideration of any evidence of the verbal agreement in order to reach a decision. While a verbal agreement is far harder to evidence than a written agreement, it is not impossible, particularly if some part of the process was documented.
Any evidence from the time of the verbal agreement will help, such as:
- Emails or letters which confirm the agreement and its terms;
- Anyone who witnessed the agreement and remembers the terms;
- Any relevant evidence of both parties’ conduct since the agreement. Examples might include aspects of the agreement that did take place and line up with what is being claimed, such as the provision of a certain quantity of items on a specific date.
How can we help
A verbal contract tends to be more challenging to enforce than a written contract. However, the right assistance can help you to successfully resolve a dispute over a verbal contract, and achieve a positive outcome.
If your business is currently engaged in a dispute over a verbal contract, it’s important that you talk to an expert to ensure that you have captured all of the evidence you need, and proceed with the case in the best way possible to resolve the issue given your particular circumstances.
At Parfitt Cresswell, we offer all prospective clients a Complimentary Initial Consultation. If you would like to speak to a legal professional, call us today on 0800 999 4437 or fill out the form below to arrange your Complimentary Initial Consultation.
