When two parties enter into a business arrangement or contract, they usually do so with a written agreement. However, there may be instances where a verbal agreement between the parties is made. While verbal agreements are not as common as written agreements, they are still legally binding. In this article, we will discuss the importance of verbal agreements between parties.
What is a Verbal Agreement?
A verbal agreement is a contract that is agreed upon through spoken words rather than a written document. Verbal agreements are legally binding as long as they meet the legal requirements of a valid contract. These requirements include:
1. Offer and acceptance: One party must make an offer, and the other party must accept that offer.
2. Consideration: Both parties must exchange something of value, such as money or services.
3. Competent parties: Both parties must be of legal age and must have the legal capacity to enter into a contract.
4. Mutual agreement: Both parties must agree to the terms of the contract.
Why are Verbal Agreements Important?
1. Flexibility: Verbal agreements are more flexible than written contracts. Parties can make changes to the agreement more easily, and they can also be less formal.
2. Cost-effective: Verbal agreements can be less costly to create than written contracts, which may require legal assistance.
3. Rapid execution: Verbal agreements can be executed quickly, allowing parties to start working together immediately.
4. Trust: Verbal agreements can help establish trust between parties, which can lead to a more productive and successful business relationship.
Enforcing Verbal Agreements
If a party fails to uphold their end of a verbal agreement, the other party can seek legal remedies. However, enforcing a verbal agreement can be difficult, as there is no written record of the agreement. To enforce a verbal agreement, the party seeking enforcement must provide evidence of the agreement, such as witness statements or email correspondence.
Verbal agreements are an important part of business transactions and can be just as legally binding as written contracts. While there are risks associated with verbal agreements, they can provide flexibility and cost savings. However, it is important to ensure that verbal agreements meet the legal requirements of a valid contract and to have evidence of the agreement if needed.