Understanding the Fundamentals of Contract Law
Introduction
A contract is a legally binding agreement between parties that sets out terms governing their relationship, setting out the parties’ responsibilities and obligations.
The next immediate question that comes to mind is likely to be: was the contract legally binding in the first place? What more if the agreement was made verbally?
Fret not — you’re not the first person with these concerns and certainly won’t be the last.
Essential Elements of Contracts
For a contract to be legally binding, five basic elements must be present:
- Offer – one party making a clearly defined object or service that is being offered;
- Acceptance – the other party accepts the offer;
- Consideration – there is an exchange of promise for something of value;
- Capacity – the parties demonstrate the legal capacity to enter a contract; and
- Intention to be legally bound – both parties must be intended to be legally bound by the contract.
Once the above elements exist, a legally binding contract is formed unless there is a vitiating factor (such as misrepresentation or illegality) that will impair the validity of the contract.
However, it can be tricky to assess the elements above, especially if the contract was made verbally.
Is a verbal contract valid in the UK?
It is not uncommon that verbal contracts often become an issue when parties fall out, agreements fall through, or one party has misunderstood the other. In many occasions, contracts are formed via phone calls or over a coffee chat.
Verbal contracts are valid in the UK and do hold up in court. However, where you may encounter difficulty in proving the terms of the contract, for which you’ll need to provide evidence to the court.
So how does a court of law know who to believe when there is a dispute of a verbal contract? In civil cases, the standard of proof is at “balance of probabilities”, which means a party only requires the slightest tip of the balance to win the case.
The court will first look at the evidence to assess the existence of a verbal contract. This could include witness statements, emails, and other correspondence to confirm the discussion, proof of payments, and meeting notes.
Therefore, gathering information and evidence is crucial to establish your version of story in the court.
What Should I Do If I Have a Verbal Contract?
It is worth noting that certain types of agreements will need to be made in writing. For example, a contract for real property (also known as land) or for shares requires a formal deed to be executed, which you must make in writing.
If you have created a verbal contract with another party and are worried about its enforceability, it may be a good idea to reduce the agreement to writing in a formal contract.
Resolving Verbal Contract Disputes
Before you ask whether your verbal contract will hold up in court, ask yourself whether you can resolve the dispute through alternative means such as negotiations between parties or more formally through the solicitor or resolve via mediation.
If a court action is unavoidable, you still need to be able to prove it in court for it to hold up. Unlike written contracts, verbal agreements are far more complex to provide evidence for, so it’s a good idea to obtain an expert opinion.
Conclusion
Ensuring your agreements are legally enforceable is critical. A legally binding agreement requires an offer, acceptance, intent for legal relations, and consideration to be legally valid and enforceable.
If you have entered into a verbal contract, it is advised to set out the key terms of your agreement in a written document, so that you have a document to rely on if you ever have to go to court.
If you stuck in the middle of a dispute over services, regardless of whether you think your dispute will end up in court, your first step in should be to speak to a solicitor.
If you are still in the early days, our experienced contract lawyers can assist in turning your verbal agreements into legally binding written contracts to safeguard your interest.
For specialist advice and support. please get in touch with our divorce solicitors in London now by calling 020 7139 9266 or contacting the GOOD LAW INTERNATIONAL office.
A warm welcome to GOOD LAW INTERNATIONAL. To learn more about us and our practice areas, we invite you to browse through our website and contact us or book an appointment.
