In today’s fast-paced world, many of us engage in conversations that lead to agreements or promises made over the phone. Whether it’s an agreement for a business transaction, a contract for services, or a simple promise between friends, verbal agreements seem to be a common part of daily life. But the question arises: Is a verbal agreements over the phone legally binding?
1. What is a Verbal Agreement?
Defining a Verbal Agreement
A verbal agreement, also known as an oral contract, is a spoken exchange between two or more parties in which they agree to do (or not do) something in exchange for something of value. In essence, it’s an agreement made through words rather than through written documentation.
These agreements can occur in various settings, from informal personal arrangements to formal business contracts. A verbal agreement can be as simple as agreeing to meet someone for lunch or as complex as a business deal over the phone. While these agreements are typically informal, they can still have legal implications.
How Do Verbal Agreements Work?
For a verbal agreement to be legally binding, it must generally meet the same requirements as any written contract. These elements include:
Offer: One party makes an offer to perform an action or provide something of value.
Acceptance: The other party agrees to the offer.
Consideration: Both parties exchange something of value (e.g., money, goods, or services).
Mutual Intent: Both parties intend to create a legally enforceable agreement.
Capacity: The parties must be legally able to enter into a contract (e.g., not minors or mentally incapacitated).
Legality: The subject matter of the agreement must be legal.
If these elements are present in a conversation over the phone, the verbal agreement can be legally binding.
2. When Are Verbal Agreements Over the Phone Legally Binding?
The Basic Rule: Verbal Agreements Can Be Binding
In most jurisdictions, verbal agreements, including those made over the phone, are considered legally binding, provided they meet the necessary requirements. However, enforcing such agreements in court can be tricky because there is no physical evidence, like a written document, to prove the terms of the agreement.
For example, if you agree over the phone to buy a car from someone and agree on a price, this may constitute a binding contract. If the other party later tries to back out, you could potentially take legal action based on your verbal agreement.
When Verbal Agreements Can Be Enforced
Verbal agreements may be legally binding under several circumstances:
Clarity of Terms: The agreement must be clear and unambiguous. If the terms are vague or open to interpretation, a court may find it difficult to enforce the agreement.
Mutual Consent: Both parties must have agreed to the terms of the agreement. This means both sides should have a clear understanding of what was discussed and agreed upon during the phone call.
Offer and Acceptance: One party must make an offer, and the other must accept it, either verbally or through actions that indicate acceptance (such as performing the agreed-upon actions).
Consideration: Both parties must exchange something of value, whether it’s money, services, or a promise to do something.
The Role of Witnesses and Documentation
While verbal agreements can be binding, they are much harder to prove in court. Having a witness or keeping some form of documentation can make it easier to prove that an agreement was made. This could include:
Call Recordings: If you recorded the phone call (with the consent of both parties in jurisdictions where it’s required), you would have solid evidence of the verbal agreement.
Emails or Texts: Follow-up emails or text messages that summarize the agreement can act as supporting evidence in case of a dispute.
Witnesses: If someone was present during the phone conversation or heard the agreement being made, they can testify to the terms of the conversation.
When Courts May Find Verbal Agreements Invalid
While verbal agreements can be binding, there are situations where a court may not enforce them:
Statute of Frauds: Certain types of contracts must be in writing to be enforceable, as mandated by the Statute of Frauds. These include contracts related to real estate, contracts that cannot be performed within one year, and contracts involving the sale of goods over a certain value.
Ambiguity: If the terms of the agreement are unclear or vague, a court may not enforce the agreement, as it’s impossible to determine what the parties truly intended.
Lack of Consideration: If there is no exchange of value, the verbal agreement may lack the necessary element of consideration and may not be binding.
Lack of Capacity: If one party is not legally capable of entering into a contract (e.g., a minor or someone of unsound mind), the verbal agreement may not be enforceable.
3. Verbal Agreements and Specific Types of Contracts
Contracts for Goods and Services
Verbal agreements for the sale of goods and services are often enforceable under the Uniform Commercial Code (UCC) in the United States. However, there are exceptions:
Contracts for the Sale of Goods Over $500: Under the UCC, contracts for the sale of goods valued at $500 or more generally must be in writing. A verbal agreement for a car purchase or other high-value item would not be enforceable unless written confirmation is provided.
Real Estate Contracts
Real estate contracts, including agreements to buy or lease property, are generally required to be in writing to be enforceable under the Statute of Frauds. A verbal agreement over the phone to sell or lease property would typically not hold up in court if it exceeds the threshold requirements.
Employment Agreements
Verbal agreements for employment can be binding, but employment law varies depending on the jurisdiction. An employee may have an enforceable agreement to work for a certain period under specific terms, even if the agreement was made over the phone. However, it’s always advisable to confirm such agreements in writing.
Consumer Contracts
Verbal agreements in consumer transactions, such as agreements with service providers (e.g., internet or cable providers), can be enforceable, but disputes may arise over the details of the agreement. In many cases, businesses will follow up with written documentation to clarify the terms and avoid confusion.
4. The Challenges of Verbal Agreements
Lack of Documentation
One of the biggest challenges with verbal agreements is the absence of documentation. Written contracts provide a clear record of the terms of the agreement and can prevent misunderstandings. Without this documentation, parties may have different recollections of what was agreed upon.
In court, the burden of proof lies with the party who is trying to enforce the agreement. If you are unable to prove the existence and terms of a verbal agreement over the phone, it can be difficult to convince the court to enforce it.
Misunderstandings and Disputes
Verbal agreements are more susceptible to misunderstandings because they rely solely on the spoken word. Without written terms, there is no easy reference for clarifying the details of the agreement. As a result, parties may dispute what was said during the phone call, leading to potential legal battles.
Fraudulent Claims
Another risk of relying on verbal agreements is the possibility of fraudulent claims. A person could later deny that the agreement was ever made or claim that the terms were different from what you remember. This highlights the importance of following up verbal agreements with written communication.
5. How to Protect Yourself in Verbal Agreements Over the Phone
Confirm Agreements in Writing
If you’ve entered into a verbal agreement over the phone, it’s always a good idea to follow up in writing. This could be through an email, text message, or formal contract. Summarize the terms of the agreement and send it to the other party for confirmation. This written confirmation can serve as proof of the agreement and help prevent misunderstandings.
Keep Detailed Records
Whenever possible, keep detailed records of your conversations. If the agreement was made over the phone, make notes about the time, date, and key points discussed. If applicable, consider recording the call (with the other party’s consent) for further evidence.
Seek Legal Advice
If you are unsure about the legal standing of a verbal agreement, especially in business or high-value transactions, it is wise to seek legal advice. A lawyer can help you understand whether your verbal agreement is enforceable and advise on how to proceed.
Conclusion
Verbal agreements made over the phone can be legally binding, but they come with risks. The lack of written documentation and the possibility of misunderstandings or fraudulent claims make these types of agreements harder to enforce in court. However, in many cases, if the verbal agreement meets the basic contract requirements (offer, acceptance, consideration, mutual consent, and legality), it can hold up legally.
To protect yourself, it is always advisable to confirm verbal agreements in writing and keep detailed records of your conversations. If you have doubts or concerns, consulting with a lawyer can help ensure that your interests are safeguarded and that you understand the full legal implications of any verbal agreement you make.
Verbal agreements remain a common part of everyday life, but understanding when they are legally binding and how to enforce them can save you significant legal trouble down the road.
Related articles:
When Is A Contract Not Legally Binding?
Is A Contract Signed By A Minor Legally Binding?
Is A Handwritten Agreement Legally Binding?