Oral Agreement CPR: Can a Verbal Agreement be Legally Binding?
In the world of business, agreements come in various forms. Some require written contracts, while others are simply verbal agreements. The latter is also known as a “gentleman’s agreement” or “oral agreement.” In this type of agreement, parties involved come to an understanding and verbally agree on the terms without putting pen to paper. But the question remains: Are these verbal agreements legally binding?
The answer isn’t straightforward, as it can vary depending on jurisdiction and situation. However, oral agreements can be legally binding if certain criteria are met. Here’s what you need to know.
Offer and Acceptance
For an oral agreement to be legally binding, there must be an offer and acceptance. This means that one party must make an offer, and the other party must accept it. Both parties must agree on the essential terms, such as the subject matter of the agreement, duration, payment terms, or any other terms that are critical to the understanding.
Consideration
Another essential element of a legally binding agreement is consideration. This means that both parties must exchange something of value, such as money, goods, or services. The consideration doesn’t have to be equal, but it must exist for the agreement to be legally binding.
Intention to Create Legal Relations
For an oral agreement to be legally binding, both parties must have the intention to create a legally binding contract. This means that both parties must have the understanding that the agreement they make will create a legal obligation, and they must intend to be bound by it.
Enforceability
Oral agreements can be more challenging to prove than written agreements, but they can be enforceable if there is enough evidence to support the terms. This is where the “he said, she said” situation can become a problem. To enforce an oral agreement, parties must be able to demonstrate that an agreement was made and that its essential terms were agreed upon. This can be done by presenting witnesses, emails, text messages, or any other evidence that can support the agreement.
Exceptions
In some situations, oral agreements may not be legally binding, such as when the subject matter of the agreement is illegal, the agreement is too vague, or the agreement is against public policy.
Conclusion
In summary, oral agreements can be legally binding if certain criteria are met. There must be an offer and acceptance, consideration, intention to create legal relations, and enforceability. However, written contracts are always the best option as they provide certainty, clarity, and evidence. If you’re considering entering into an oral agreement, it’s essential to keep these criteria in mind and consult with legal counsel to understand the risks and potential issues.