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Can a verbal promise constitute a contract?

| May 27, 2020 | Firm News |

A lot of people take pride in the power of their word. While that’s an admirable trait to have, it can cause problems in the business word. Here’s how. Sometimes in business, verbal promises are made and accepted based on the strength of an individual’s reputation, character, and trustworthiness. However, in far too many of these instances the promises are broken, leaving the other party is a tough position. This issue can lead to supply disruptions, lost revenues, and a damaged business reputation.

The question then becomes whether a verbal promise can be legally enforced. Generally speaking, contract law requires an agreement to be reduced to writing before it can be rendered legally enforceable, but there may be instances where a verbal promise can be upheld as a legally binding contract.

To determine whether a verbal promise has stepped over into contract territory, a court will consider a number of factors. The first step is to consider whether an offer was actually made and accepted. What language was used in the promise? Did it say that something could be provided within a certain timeframe or for a certain price?

Next, consider whether there was detrimental reliance. Did someone rely on that promise by cancelling an order with another company or reducing prices in expectation of a large delivery? If so, then it’s more likely that a verbal promise has become a contract. It’s also worth looking at the history of relations between the parties. If they commonly operated on a handshake basis, then a verbal promise is probably more in line with each parties’ expectations.

Dealing with contractual issues can be stressful, especially given the fact that you might have been friendly with the other party at one time or another. But business is business. You need to protect your business interest as fully as possible, which means taking legal action if necessary. Skilled business law attorneys stand ready to help you with that should the need arise.