Contracts can make your business run more smoothly and provide more certainty in your business operations. Yet, a lot of small businesses forego the formalities of written contracts in hopes of saving time and money. This can be risky, as sometimes these verbal agreements will be found to be legally enforceable and other times they won’t.
When will a verbal promise be deemed a contract?
Before deciding whether a verbal promise constitutes a legally binding contract, a court will assess a number of factors. This includes each of the following:
- Whether an actual offer was made. Here, the court is going to look at the reasonableness of the promise in light of the circumstances. If the promise was outlandish, then it’s probably not going to be found to be enforceable.
- Whether the verbal promise was accepted. This may be shown through words or actions.
- How the parties have conducted business in the past. If they previously relied on verbal promises, then a subsequent verbal promise is more likely to be found to be enforceable.
- Whether there was detrimental reliance on the promise. Here, the court will assess whether there was financial harm caused by one party’s reliance on the promise that was made. For example, the accepting party may have foregone a more favorable contract in favor of the promise, and that other contract may no longer be available, thereby leading to increased financial costs when the verbal promise becomes unfulfilled.
As you can see, this analysis will depend in large part on the facts at hand. So, you’ll want to make sure you have a solid understanding of those facts and how they interplay with the law.
Zealously protect your interests
A poor outcome in a contract dispute can be damaging to your business’ bottom line and reputation. With so much on the line, you need to make sure that you’re presenting the best arguments possible in your case. An attorney who is experienced in handling these kinds of cases may be able to help you craft the legal strategy that’s best for you and your business.