For a variety of reasons, your business might have entered into a verbal agreement with another party. This could be because the other party does not want to be too formal, or you may have had to agree a supplier or customer contract very quickly without the time you would usually prefer in order to properly document that contract before agreeing to it. It might also arise when an existing contract is being varied to address an issue that has arisen.

‘If something then goes wrong which is covered by that oral agreement, the lack of a written contract can create interpretation issues and misunderstandings that must be cleared up in order to resolve the dispute,’ says Andrew Wood, Dispute Resolution solicitor with Wollens. ‘If you find yourself in that situation, all is not lost. However, it will usually require some careful unravelling by a professional who knows what they are looking for, in order to ensure that any dispute can be resolved and the parties can move on.’

Andrew Wood looks at what is required in order 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.

What constitutes a valid verbal agreement?  

A verbal contract is the same as a written contract in that there must be an offer made, an acceptance of that offer, and some consideration must be paid under the contract. Both parties must have the intention to be bound by the verbal contract.

What are the pitfalls of a verbal agreement? 

While a verbal contract is legal in the UK, it is inevitably harder to provide evidence of the terms of that contract than if it were a written one.

In addition, it is likely that if you have entered into a verbal contract, you may not have considered and agreed upon all of the terms that you might need to have agreed on, making it harder to determine key issues later.

For example, you might agree a verbal contract to supply a business with your product. You may have agreed quantity and price verbally. However, you should also agree issues such as warranties, liability if you cannot deliver on time or the expected amount, or if payment is not made when expected, how to terminate a contract, and how to resolve disputes without court intervention.

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?  

If you have a dispute following a verbal contractual agreement, you will have several remedies open to you to resolve that contractual dispute.

The first step is to try to resolve the issues by negotiation. This may have the advantage of saving the relationship and allowing you to continue to work together. It may also be a good time to put a negotiated agreement in writing, to avoid any future misunderstandings.

If negotiation is not successful, then there are other options available before you might have to go to court. These are called ‘alternative dispute resolution’ (ADR) and include arbitration and mediation which involve an independent party either adjudicating on the dispute, or working with you both to try to reach agreement.

If these options do not work, then you can issue a claim in court for breach of contract, including a claim for any damages that might have arisen. A judge will review the available evidence, and decide how best to fairly resolve the dispute.

What evidence will help prove or refute a verbal agreement

If an independent third party, be it an adjudicator, mediator or judge has to decide how to resolve your dispute for you, they will want to see any evidence of the agreement made. A verbal agreement is far harder to evidence than a written agreement, but not impossible.

You may have contemporaneous evidence from the time that the verbal agreement was agreed. For example, do you have:

• emails or letters setting out or mentioning what you agreed;
• witnesses to the agreement at the time who can remember what was agreed; and
• evidence of the course of conduct you have had since the agreement. For example, if you regularly supplied 200 items a month on the 5^th of each month and were paid a certain sum per item, at roughly the same time, then evidence of this will help to show that this was what was expected by both parties.

How we can help

A verbal contract is unlikely to be quite as easy to enforce as a written contract. However, it is still possible to resolve a dispute over a verbal contract with the right assistance.

If your business is in dispute over a verbal contract, it is important that you consult an expert to ensure that you capture all of the evidence that you need, and proceed in the best way possible to resolve the issue, based on all of the circumstances. 

You can also complete an online enquiry form. One of the Wollens team will contact you as soon as they are available.