What Is A Verbal Agreement?
A verbal agreement is an agreement that parties enter into when they are communicating verbally with each other. In other words, it is a contract that is not written down but merely stated orally. Depending on the law of the state, verbal contracts may be both legally binding or not legally binding. If they are legally binding that means that the terms of the agreement can be enforced in court.
Verbal agreements are made in many circumstances , however they’re mostly made when parties do not feel that the terms of their agreement need to be reduced to writing. For example, if John goes to a bakery and orders a dozen donuts, pays for them and has them boxed up the salesperson will get him his dozen donuts. In this case, the parties never actually write anything down, but they both understand that the sale of the dozen donuts has been agreed to and has taken place.
The Legal Status of Verbal Agreements
Whether spoken or written, a verbal agreement requires five elements to stand in court: Agreement of a Contract; Capacity of the parties; Mutuality; Consideration; and Legality. When parties reach an agreement to the main elements of a contract, (Agreement of a Contract; Capacity of the parties; Mutuality; Consideration; and Legality) they are bound by the terms of the contract, and the courts will enforce this obligation.
Agreement of a Contract
The agreement must express a clear intention to form a contract. This is often expressed by the parties’ verbal performance of the terms. For example, the selling of an appliance and payment is one party’s verbal agreement to purchase the item and the other’s verbal agreement to fulfill those terms by delivering the appliance in exchange for the price paid.
Capacity of the Parties
The agreement must be entered into by parties that have the legal ability to contract. For example, adults of sound mind can enter into an agreement whereas minors, the insane, mentally incompetent, and the under intoxication or influence of drugs cannot legally agree to the terms.
Mutuality
The agreement must involve mutuality; each party must incur an obligation to the other.
Consideration
A performance or promise of a performance must be a part of the terms of the contract. For example, an agreement to sell a vehicle is not enforceable until the buyer pays for the vehicle and the seller delivers the vehicle and ownership papers.
Legality
The agreement must be for a lawful purpose. For example, the selling of narcotics is unlawful.
Problems With Suing Over a Verbal Agreement
Many times it is difficult to prove the existence of a verbal contract. You literally have to prove something by talking to people, maybe family members or the people involved in the contract. Verbal contracts are harder to reach an agreement over the terms because nobody has a written record of what was actually said. This is a huge stumbling block when reaching an agreement.
For example, let’s say Mary and Bill make an oral agreement to exchange services; Bill does xerox work and Mary does locksmith work. Bill goes ahead and does some xerox work for Mary, but when Mary calls to ask Bill to do some locksmith work for her with the original deal of exchanging services, Bill refuses to do any more work. Mary decides her only course of action is to sue Bill for breach of contract.
Mary’s lawsuit is going to be difficult because of the lack of evidence and witness with the required knowledge of a verbal contract.
You need to show that the contract exists. Find phone records that may show that you talked to the party with whom you had a verbal contract.
Remember that the burden of proof is on you to show that the contract exists.
Verbal Agreement Claims and Evidence
One of the biggest questions in a case involving a verbal contract is what kind of evidence can be used to prove the existence and terms of that agreement. The answer in Illinois is: all kinds of things. For simple oral contracts, any evidence a trier of fact (judge or jury) finds "reasonably satisfactory" can be considered. This means a lot of different types of evidence, in a lot of different forms, is fair game. Witnesses: Just because an agreement isn’t in writing doesn’t mean there aren’t any witnesses to it. An employee or manager may recall conversations about the deal that can be offered at trial. A case of admitted oral "wage theft" saw the plaintiff restaurant worker testify that the owner had agreed beforehand to pay her a specific wage. The owner disputed the amount, but the judge chose to believe the plaintiff. That case was decided based on testimony, but even if there was a videotape proving the restaurant worker was lying, that would not have been out of bounds to introduce into evidence. Emails: Electronic records are the currency of the business world these days, so it makes sense they’d figure into a case regarding the terms of an agreement. If you agree to purchase something over the phone, and then thereafter email that person telling them the details of the agreement, that email can be used as evidence of the contract terms. Generally speaking, that email can be brought in even if the terms of the agreement change. For example, if you agree to buy a car for $5,000, and then you email the seller and tell them you will pay the remainder of the balance ($2,000) at the end of the year, that’s additional evidence of the existence and timing of the oral agreement. Text Messages: Similar to email, texting is another form of evidence that can be used to show agreement. And while it seems like the types of things one might text about would be less formal than an email, the truth is people will frequently text about deals they’re making. An agreement made by phone doesn’t seem all that far removed from an agreement made by text. If the terms are agreed upon and there are texts discussing the terms, you can be sure that text will be offered into evidence in a lawsuit. The impact of this evidence on the outcome of a lawsuit is hard to predict. Some judges are going to be more likely to allow in more evidence, and others are going to be less likely to do so, especially when it comes to text messages. In addition, the weight of the evidence can vary by case. While witness testimony is usually given a lot of weight, sometimes a witness testimony is entirely discredited and not given any weight at all, and sometimes it’s given a lot of weight and becomes the deciding factor in the case. The bottom line is that even though a verbal contract seems like a less formal kind of contract, evidence regarding that contract will be given a serious consideration in disputes about its existence and terms.
Verbal Contracts Exceptions and Limitations
There are limitations and exceptions to this rule, however. One of the more prominent exceptions is known as the Statute of Frauds, which mandates that certain kinds of contracts be in writing in order to be enforceable. For example, contracts pertaining to the sale of land or real estate must be in writing, as do contracts that cannot be fully performed within one year. Other agreements, like those for the promise to pay or pay money for the benefit of a third party, must be in writing.
For example, if you orally agree to purchase a car from a friend , it’s likely that this contract would be enforceable. However, if you agree to buy a $100,000 piece of land from a friend, or you agree to pay a third-party service provider $50,000 within the next five years, the absence of a written contract could render that agreement void.
The terms "written" and "writing" can also include methods other than pen and paper—if you exchanged electronic messages, and the intent of the parties was to form a legally binding agreement, those electronic communications can be used to demonstrate the existence of an enforceable contract between the two parties.
What To Do if You’re Thinking About Suing
If you find yourself in a situation where you believe you have a strong case to sue someone for breaking a verbal agreement, it’s essential to take practical steps to ensure the best possible outcome. Here are some critical actions to take:
Gathering Evidence
Whether you have a formal contract or not, collecting evidence can significantly enhance your case. Gather any emails, text messages, or letters that contain discussions about the agreement. This can include details about what was supposed to happen by when, who was responsible for what, and any other information that helps to prove the existence and terms of your verbal agreement. If there were any witnesses to the agreement being made, they should be prompted to submit a written statement as well.
Seek Legal Advice
While the legal world is filled with individuals who believe they know better than the attorneys, investing in legal counsel is an absolute must for this dynamic. Find a lawyer who specializes in breach of contract cases and discuss the specifics of your case openly. They can guide you on whether or not you have a viable case and help you prepare for what a lawsuit might entail.
Understanding Potential Outcomes
Once you have an idea of the strength of your case, you will have a better idea of what to expect moving forward. However, dealing with a potential lawsuit can be a long and arduous process. Instead of jumping to the conclusion that you are owed a certain amount of money, consider taking the matter to small claims. In small claims court, you will present your case in front of the judge and they will determine whether or not you are owed compensation. If you lose, you may or may not be required to pay the defendant’s legal fees.
Alternative Ways to Recover Without Suing
If you think you might have a claim for damages for breach of an oral contract, you might consider alternative dispute resolution instead of filing a law suit. Some of the problems with suing someone arise from empty pocket syndrome: in simple terms, can the defendant pay a judgment? If the answer is no, litigation can be a waste of time. Alternative dispute resolution is a way to streamline collection of judgments because money can be funneled through the mediator. The mediator can be a neutral third party or an agent of one of the parties. A lawyer often acts as the mediator when people are suing each other. Mediation does not require formal or written presentation of evidence, rather it is a casual discussion of the case overseen by the mediator . A resolution may involve giving something, getting something or a mutual give and take.
Arbitration has a little more structure than mediation but is still relatively inexpensive. An arbitration can range from informal to very formal and can be conducted by a retired judge. Arbitration can either be binding or nonbinding. The decision made by the arbitrator is typically final and will not be appeallable. An arbitration will most likely be less expensive than a trial. Arbitration also allows for flexibility in scheduling.
Other methods to pursue claims without risking fees for hiring a lawyer include small claims court and mediation through a court program.