The Legal Ramifications of Breaking a Verbal Contract

Introduction to Verbal Contracts

Verbal contracts, also known as verbal agreements, are legally binding and enforceable agreements that don't involve written documentation. These agreements can cover a wide range of transactions, from simple personal arrangements to more complex business deals. They depend on the trust and commitment of the contracting parties. However, the effectiveness and enforceability of these verbal agreements can vary based on several factors, such as the nature of the agreement, the context, and the availability of evidence.

Consider a hypothetical scenario: if you enter into a verbal contract for the creation of user-generated content (UGC) videos, and the other party fails to fulfill their part of the agreement, you might argue that you do not have to pay for an incomplete contracted job. However, the other party might request compensation for their time invested. This situation demonstrates the complexity and potential legal ramifications of breaking a verbal contract.

Enforceability of Verbal Contracts

The law does not make a distinction between contracts that are written and those that are verbal. Both types of agreements are subject to the same principles of formation, which include the establishment of an offer, acceptance, agreement on terms, and consideration. However, the enforceability of a verbal contract often relies on proving its existence, and establishing the terms of the agreement.

Proving the Existence of a Verbal Contract

One of the primary challenges with verbal contracts is proving their terms. This can be a difficult task, especially when the verbally agreed terms are disputed. Witnesses, contemporaneous documents, and other evidence are often required to substantiate the existence of the contract and its terms. For example, if the other party in the UGC video scenario does not fulfill their obligation, you would need to prove the terms of the verbal contract. This can involve showing that both parties had an understanding and that one party acted in reliance on that understanding.

The burden of proof lies with the party seeking to enforce the agreement. Without sufficient evidence, a verbal contract might not be enforceable in court. However, even in the absence of a written contract, evidence such as witness statements, emails, payments, and other communications can help establish the contract.

Legal Ramifications and Remedies

If a party breaches a verbal contract, the consequences can be significant. The legal ramifications and remedies are the same as those for written contracts, provided you can establish the contract's existence and terms. The breaching party can be held liable for damages, specific performance, or rescission of the contract (where appropriate).

Case Example: Collection Agency Experience

From personal experience while working in law firm collections, out of several collection cases, only two involved written contracts. In all other cases, the collection agency relied on agreements that were recorded and documented through phone calls, emails, and client communications. These contemporaneous documents and recordings became key pieces of evidence in proving the existence and terms of the verbal agreements.

For instance, in one case, the law firm had a conversation with a client where the client verbally agreed to pay a certain amount for services rendered. Although a written contract was not present, the verbal agreement was supported by the documented conversation and the client's past payments history. This provided a strong case for enforcing payment.

Conclusion

Verbal contracts are legally binding and enforceable as long as they can be proven. The challenge lies in gathering the necessary evidence to establish the existence and terms of the agreement. Legal remedies for breach of a verbal contract are the same as those for written contracts, ensuring fairness and accountability in interpersonal agreements.