Written contracts can help to protect businesses from operational disruptions and unnecessary conflicts with employees, clients and vendors. When the terms of an agreement are in writing, it is easier to confirm and enforce the terms set.
However, successful small business owners often operate on a handshake basis. After they reach a verbal agreement with another company or client, they may take them at their word and move forward in good faith. Some small business owners use verbal agreements to establish arrangements with vendors and service providers. Others accept verbal agreements from their clients or customers.
Theoretically, verbal contracts are as valid and enforceable as written contracts. With certain exceptions for agreements reached on the phone due to telemarketing and other, unusual scenarios, those who verbally agree to a business arrangement typically have an obligation to fulfill their promises.
Do small business owners have any legal recourse after one party refuses to fulfill their obligations per the terms of a verbal agreement?
The courts can help with enforcement
Ideally, those who negotiate a verbal agreement then integrate the terms of the arrangement into a written contract. Even if they do not, the original agreement could be enforceable.
Typically, the party hoping to enforce the contract needs supporting documentation. Witnesses who overheard the negotiations could help affirm that there was an agreement in place. Emails, text messages and other forms of electronic communication can also help validate the authenticity of a verbal agreement and even details of the arrangement.
The more documentation people have affirming that there was a specific agreement between the parties and one of them did not uphold that agreement, the easier it may be to demand accountability. The courts can enforce the agreement in some cases.
Other times, they could award damages if the breach of the agreements has had economic consequences for one business. Business owners struggling to enforce a contract or cope with the aftermath of a breach of a verbal agreement may need help protecting their financial interests.
Reviewing concerning circumstances at length with a skilled legal team can help small business owners hold others accountable and learn from their mistakes. After addressing a problem that occurred because of a verbal agreement, transitioning to written contracts for protection in the future might be the best option available.