A spoken agreement will be valid if the elements of contract formation exist. Unlike written documents that offer clear evidence of an agreement, spoken agreements do not provide such clearcut evidence. Regardless, spoken agreements are extremely common in the business world. This article will explain how to measure the validity of a spoken agreement, and how to enforce it.
Has the Spoken Agreement formed a Valid Contract?
Both spoken and written agreements must satisfy the elements of contract formation. Here are the four essential elements of a contract:
A party (offeror) must make an offer that is capable of acceptance. In this, a legally valid offer is an expression of willingness to enter into an enforceable contract on specified terms.
The other party (offeree) must accept the offeror’s offer. Acceptance involves the mutual assent between parties to the terms of an offer.
Consideration requires that something of value must be given in exchange for a promise.
For bilateral contracts (an exchange of promises), both parties make promises that must be supported by consideration. Alternatively, in unilateral contracts (contract accepted by performance of specified acts), one party executes consideration through performing the acts required by the other party’s promise.
Intention to Create Legal Relations
Both parties must have intended to create legal relations with one another. In a commercial context, there is a presumption that parties usually intend the contract to be legally binding.
How to Prove the Existence of a Spoken Agreement?
Firstly, you must prove the elements of contract formation to enforce a spoken agreement. It is also important to show that the agreement was made between you and the other party.
However, in a commercial context, we recommend that you avoid oral contracts. This is because a lack of any written evidence will inevitability result in one party’s word against the other. Rather, we recommend that you obtain as much written evidence as possible in order to strengthen your case.
Does a Statement Made During a Negotiation Constitute as a Term of a Spoken Agreement?
When parties are negotiating, they may make statements relating to the subject matter of the contract between them. These statements are often made ineffective by subsequent events and statements.
However, one party may claim that a statement made by the other during the negotiation was a term of the contract. In these instances, it is important to understand the relevance of written and oral evidence:
The Relevance of Written and Oral Evidence.
Without delving deep into the complexities of contract law, written evidence is admissible in validating an oral agreement. For example, there may be an entire agreement clause. This clause expressly states that the written document contains all of the terms of the agreement.
If there is no such clause, courts will look at the presumed intentions of the parties involved. This will assist courts in determining whether the terms of the contract are exclusive to what has been written. It is in these cases especially, that oral evidence is admissible.
To Sum Up.
A spoken agreement, while common, can cause issues when it comes to enforcing the contract. While spoken agreements are not exempt from the ordinary principles of contract law, the absence of written evidence may prove problematic.
If you need assistance in regards to your oral agreement, our commercial lawyers are here to help. Just call us at please do not hesitate to call us at 1300 337 997, or complete the form on this page.