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Are verbal promises legally enforceable contracts?

On Behalf of | Oct 14, 2021 | Business Law

A lot of small businesses try to cut their expenses and simplify their operations. This is understandable, especially given the fact that taking steps to increase efficiency can lead to increased output and profits. But when these measures include foregoing legal formalities, then problems can arise.

Be careful with verbal agreements

One way that legal issues can arise is through the use of verbal promises. Many small business owners have built such strong relationships with their suppliers and their customers that they feel comfortable operating on a word-of-mouth approach. Both parties make verbal promises and stick to them. But what happens when one party doesn’t adhere to a verbal promise?

At that point, the question becomes whether the promise constitutes a legally enforceable contract. To make that determination, a court will consider:

  • Whether an offer was made and the context surrounding that offer
  • The viability of the offer, meaning if it was realistic in nature
  • Whether the offer was accepted
  • The past dealings of the parties
  • Whether there was detrimental reliance on the promise

Here, history between the parties can be crucial. If the parties to the dispute frequently operated based on verbal promises, then a broken verbal promise is much more likely to be deemed enforceable. Detrimental reliance is key, too. Here, you’ll have to consider if either party was harmed by their reliance on the promise, such as by missing out on another favorable contract.

Fight to secure your business interests

As a business, you’re bound to face a multitude of legal issues. But don’t let that scare you. By being proactive in protecting your interests, you can better ensure that you position yourself to fight through these challenges and achieve the positive outcomes you desire.