Virtual General Counsel LLC
Virtual General Counsel LLC

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Can a verbal promise be enforced as a contract?

| Dec 2, 2020 | Contracts |

A lot of business owners take pride in their word and their business relationships. In many instances, businesses operate based solely on the word of those they do business with. While this might simplify matters some, it can also lead to enormous complications that can have ramifications on your bottom line, your business relationships, and your reputation. So, if you find yourself engaging in word-based business dealings, then you need to carefully consider whether those verbal promises, whether made by you or by the person you’re doing business with, constitute legally enforceable contracts.

When do verbal promises become enforceable contracts?

What happens in these cases in many instances is that one party makes a verbal promise that isn’t upheld, causing damage to the other party. The harmed party then tries to hold the verbal promise legally enforceable so that they can recover compensation for damages suffered. So what will a court consider in one of these cases to determine if a verbal promise is actually a contract? Each of the following will be closely scrutinized:

  • The reasonableness of the offer: A verbal promise that is outlandish or too good to be true will likely be found to be unenforceable.
  • History of business dealings: If the parties in question have conducted business based on verbal promises in the past, then there’s a greater chance that an unfulfilled promise made in a similar vein will be deemed legally enforceable.
  • Detrimental reliance: This is probably the biggest and most important issue for a court to consider. If the harmed party relied on the verbal promise to the extent that he or she harmed based on that reliance, such as by missing out on a favorable written contract with another party, then the verbal promise is more likely to be enforced as a contract.

Don’t leave your business disputes to chance

When it comes to business contracts, there’s a lot at stake. A breached contract, regardless of which side of the dispute you fall on, can be costly and hurt your business operations in both the short and long-term. But you shouldn’t try to resolve these matters on your own. Instead, you should consider working with an attorney who will know how to fight to protect your interests.